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Making sure wellness programs comply with the law
Taxation, discrimination and reward thresholds are some of the areas companies must consider.
Interest in wellness programs is on the rise around the country and in West Michigan as employers and employees face rising health insurance and medical care costs.
But before a company jumps on the calorie-counting and smoking-cessation wagon, there are a few things that should be considered in anticipation of rolling out an office wellness program.
First, there is a spectrum of wellness programs that can be instituted and different legal issues apply depending on the depth of the program, said Nancy Farnam, a partner with Varnum Law.
One of the most basic wellness programs a company can go with is offering to reward employees with gift cards, fitness swag or something similar for engaging in healthy behaviors such as walking more and eating well.
There are very few legal issues a company needs to worry about when offering rewards for healthy behaviors, but Farnam said one rule that might apply, depending on the value of the rewards, is taxes.
“One thing to think about is there is taxation of benefits,” she said. “If an employer gave a gift card out, that is probably going to be included in the employee’s taxable income.”
Many companies want to go beyond rewarding employees for healthy behaviors and instead help them to understand and improve their health risks. Those companies are instituting wellness programs that include health assessment surveys or maybe even a trip to the doctor for a physical exam.
“None of those rewards are based on the outcomes of that activity,” Farnam explained. “For example, you fill out a health risk assessment, but it doesn’t matter what your scores are or how poor your health is. You still get the reward just for doing it.
“Those plans have to think about discrimination under the Americans with Disabilities Act,” she added.
An employer cannot force anyone to participate in the wellness program and also cannot exclude someone from a health plan for not participating.
Even further along the wellness spectrum are programs that do look at outcomes.
“Say you go to the doctor and you get your physical. You have to be able to demonstrate that your BMI level is below a certain point, your cholesterol is below a certain point, or that you don’t smoke,” Farnam said. “You are actually having to meet some sort of requirement.”
Often in these cases employees are incentivized to participate by the promise of lower health care premiums for meeting certain health requirements.
Farnam said there are several things a company needs to think about when requiring certain health outcomes in return for a reward or incentive.
“Those plans are also subject to the Americans with Disabilities Act, so you have to think about disability issues,” she said. “They’re also subject to HIPAA.”
The Health Insurance Portability and Accountability Act has many requirements, but Farnam said there are two big ones employers should be aware of.
“One is that the reward has to be limited, and generally that percentage is 30 percent,” she said. “What that means is an employee whose premium is $100 per month who satisfies those standards — they meet the BMI and such — would pay $70, and those who can’t meet it would pay $100.
“If you have a non-smoking component in your wellness program, that incentive can go up to 50 percent.”
But even if an employee cannot meet the outcome requirement, they may not necessarily be denied the lower premium rate.
“The requirement there is, you have to give the employees alternative standards to meet if they are not able to meet the standards due to a health condition,” Farnam said.
“The best example I have of that is the smoking cessation programs. So, you say to your employees, if you smoke you are going to pay a higher premium, but if you attend these smoking cessation classes we’ll give you the lower premium regardless of if you stop smoking or not.
“As long as they are going to the smoking cessation class, they can keep smoking and they get the lower premium.”
She said that is because smoking is considered a health condition under HIPAA.
Other conditions that might fall under the HIPAA requirement include genetic conditions, such as high cholesterol that cannot easily be decreased by the employee doing the things that would typically be necessary to meet the lower cholesterol requirements.
HIPAA also includes privacy laws, and companies need to make sure they are not gaining information they shouldn’t be through a wellness program.
“Speaking in very general terms, HIPAA privacy rules generally say that a group health plan can access information, or employees that work for the company, with respect to the group health plan, can get information, (but) they can only get as much information as they need to do their job, and it can’t be shared with the bosses,” she said.
Farnam said one of the best practices she recommends companies follow is hiring a third party to administer wellness programs. That helps mitigate any risk of an employee saying he or she was fired or discriminated against based on health outcomes.
“All of the information is going to this third party. It is not being shared with the employer at all, other than the fact that the person met the requirements or they didn’t,” she explained.
“The law says you cannot fire or discriminate against somebody based on their health status, so having that third party as the middle person is a great idea. It’s a smart way to protect yourself.”
Farnam said companies also need to be willing to make the initial investment needed in order to create a successful wellness program for its employees, which includes time, money and resources.
All in all, Farnam thinks wellness programs are worth that investment.
“The full-blown type of wellness programs are a great way to start helping to lower costs — not just insurance costs but costs overall, because ultimately the goal is you’re going to have a healthier workforce,” she said.