December 07, 2009
Employee wellness programs have become increasingly popular with employers given rising concerns about mounting healthcare costs and the potential benefits offered by employee wellness programs. Moreover, the recent national focus on healthcare has caused many employers to reevaluate their healthcare policies and seek ways to reduce expenses through the implementation of employee wellness programs. While employee wellness programs may appear to offer significant benefits, there are some potential liabilities for employers to consider. In particular, new interim final regulations recently promulgated under the Genetic Information Non-Discrimination Act of 2008 (“GINA”) may impact significantly employer-sponsored wellness programs. Additionally, other statutes, including the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the Americans with Disabilities Act (“ADA”) contain potential legal hurdles for which employers must account when implementing employee wellness programs.
This article will address how the new regulations promulgated under GINA may impact employee wellness programs, and will also review various other statutes employers must consider when designing a wellness program in order to avoid potential legal pitfalls.
I. Wellness Programs Defined
Employee wellness programs have arisen as a creative solution to employers faced with rising costs associated with employer-sponsored health coverage. Wellness programs aim to control illnesses, conditions and unhealthy behaviors before they become more serious and costly by encouraging employees to take preventative measures and make healthier choices. Employee wellness programs derive cost-savings not only from reducing healthcare costs, but also through reduced absenteeism, decreased rates of illness and injuries, increased retention and recruitment of employees, and improved employee relations and morale.However, as appealing as wellness programs may be for employers, they may raise a variety of legal issues and should be carefully structured to comply with applicable laws. The patchwork of statutes that may potentially impact wellness programs requires special attention, and employers should be aware that a program that complies with one statute may be prohibited under another statute. II. The Genetic Nondiscrimination Act of 2008
GINA prohibits discrimination on the basis of genetic information with respect to health insurance and employment. Title I of GINA amends § 702 of the Employee Retirement Income Security Act (“ERISA”) to restrict the collection and use of genetic information by group health plans and insurers by prohibiting them from:
• Adjusting the premium or contribution amounts for a group on the basis of genetic information;
• Requesting or requiring an individual or family member to undergo a genetic test; and
• Requesting, requiring or purchasing genetic information prior to or in connection with enrollment, or at any time for underwriting purposes.
On October 7, 2009, the Departments of Labor, Health and Human Services, and Treasury jointly issued interim final regulations implementing the restrictions under GINA, which become effective on December 7, 2009.
A. Broad Definitions
GINA prohibits group health plans and insurers from collecting genetic information prior to or in connection with enrollment or for underwriting purposes. The definitions of “genetic information,” “underwriting purposes,” and “prior to or in connection with enrollment,” in the statute and regulations are broad and may be more far-reaching than a plain reading of those terms would suggest.
• Underwriting: includes the rules for or the determination of eligibility for benefits under the plan or coverage, computing premiums or contribution amounts under the plan or coverage, the applications of any pre-existing condition exclusion, and other activities related to the creation, renewal, or replacement of a contract of health insurance or health benefits.
• Genetic Information: means information about (1) an individual’s genetic tests; (2) genetic tests of family members; and (3) the manifestation of a disease or disorder in an individual’s family members.
• Enrollment: Genetic information is considered collected prior to enrollment if it is collected before an individual’s effective date of coverage under the health plan.
B. Impact on Employee Wellness Programs
The regulations note that the most significant costs of complying with the new GINA regulations will likely be concentrated among the group health plans that are associated with wellness and disease management programs that provide rewards and incentives to employees who complete heath risk assessments (“HRAs”). HRAs are commonly used in wellness programs to identify at-risk individuals and provide an opportunity for preventative treatment or disease management. Some group health plans provide rewards to employees who complete the HRAs, such as premium reductions, lower deductibles, and cash bonus payments.
Because the prohibition on the collection of “genetic information” includes the collection of family medical history, HRAs that request family medical history can be collected only for purposes other than underwriting and the collection must not be prior to or in connection with enrollment. The prohibition related to underwriting encompasses any changes to deductibles and any discounts, rebates, in-kind payments or other methods of altering premiums as a reward or punishment. For example, under the interim regulation a group health plan that provides a premium reduction to enrollees who complete a HRA that includes questions about family medical history would violate GINA because the request for family medical history is a request for genetic information and completing the HRA results in a premium reduction, which means that the request is for underwriting purposes.Employers should conduct a compliance review to ensure that HRAs do not request genetic information prior to enrollment in a health plan and that they do not offer rewards or penalties in conjunction with an HRA that requests genetic information, even if the request is made after enrollment.
III. Additional Legal Considerations
As employers reevaluate their wellness programs in light of the new GINA regulations, they should take this opportunity to ensure compliance with other statutes that may impact employee wellness programs, including HIPAA and the ADA.
A. HIPAA Compliance
HIPAA prohibits ERISA group health plans from using a health factor as a basis for discrimination with regard to either eligibility to enroll or premium contributions. See ERISA § 702(a) and (b); 29 U.S.C. § 1182(a) and (b). The enumerated list of “health factors” includes health status, medical conditions, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability. See 29 C.F.R. § 2590.702.
If a wellness program does not condition a reward on an individual satisfying a standard that is related to a health factor, the wellness program does not violate HIPAA, so long as participation in the program is made available to all similarly situated individuals. Id. For example, a reward based on participation in a program, without regard to the health outcomes resulting from that program, would not violate HIPAA, if all similarly situated employees may participate in the program. However, if an employer wishes to condition rewards based on individuals satisfying standards related to a health factor, the HIPAA regulations provide an exception to the nondiscrimination provisions for wellness programs that satisfy the following requirements:
• The reward for the wellness program must not exceed 20 percent of the cost of employee-only coverage under the plan;
• The program must be reasonably designed to promote good health or prevent disease;
• The program must give individuals eligible for the program the opportunity to qualify for the reward under the program at least once per year;
• The reward under the program must be available to all similarly situated individuals and the program must allow a reasonable alternative standard or waiver for any individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable to satisfy the condition; and
• All plan materials describing the terms of the program must disclose the availability of a reasonable alternative standard or the possibility of waiver of the otherwise applicable standard.
However, there is an exception for benign discrimination for wellness plans that discriminate in favor of an individual based on a health factor. For example, a program that waives a deductible for diabetic patients who enroll in a disease management program does not violate HIPAA’s nondiscrimination provision.
B. The Americans with Disabilities Act
The ADA prohibits discrimination against a qualified individual on the basis of disability in regard to job application procedures, the hiring, advancement, or discharge of employees, employee compensation, job training, and other terms, conditions, and privileges of employment. See 42 U.S.C. § 12112. Employers should take into account two provisions of the ADA when implementing wellness programs: (1) the reasonable accommodation requirement and (2) the prohibition on disability-related inquiries.
If a health factor on which a bona fide wellness program conditions a reward constitutes a disability as defined by the ADA, the program must comply with the ADA’s reasonable accommodation requirement, and the employer must engage in an interactive process with the disabled employee to develop a reasonable alternative that satisfies the goals of the wellness program and the individual’s need for a reasonable accommodation. See 42 U.S.C. § 12102(1); 29 C.F.R. 1630.2.
Additionally, the ADA prohibits all disability-related inquiries and medical examinations prior to an offer of employment, and after a conditional offer is made, allows disability-related questions and medical examinations only if they are job-related and consistent with business necessity. See 42 U.S.C. § 12112(d). This provision is particularly important because it protects all employees and is not limited to disabled individuals.
The EEOC Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the ADA states that disability-related inquiries and medical examinations are permitted as part of a voluntary wellness program. See http://www.eeoc.gov/policy/docs/guidance-inquiries.html. The EEOC considers a wellness program to be voluntary if employees are neither required to participate nor penalized for non-participation, but it has not taken a formal position on what level of financial inducement is permitted. The EEOC has opined that a program that denies reimbursement for health-related expenses for employees who do not complete an HRA that includes disability-related questions would not be considered voluntary. See EEOC Informal Discussion Letter, dated August 10, 2009. Employers using HRAs as part of a wellness program may avoid violating the ADA’s prohibitions by focusing questions on behaviors rather than on medical conditions. For example, employers may ask whether an employee regularly sees a personal doctor for routine care, or how many servings of vegetables or fruit an employee eats daily. Id.
C. Additional Statutes To Consider
Employers should be aware of certain other statutes when implementing a wellness program, including:
• Lifestyle Discrimination Statutes: Many states have passed lifestyle discrimination statutes that protect employees from being discriminated against for engaging in off-duty lawful activities, even if those activities are unhealthy. For example, in California, employers may not discriminate against an employee or applicant for lawful conduct occurring during nonworking hours away from the employer’s premises. See Cal. Lab. Code §§ 96(k); 98.6.
• ERISA: Under ERISA § 510, an employer may not discharge an employee to prevent that employee from obtaining his or her benefit rights. This provision may be implicated where employers institute mandatory wellness programs. For example, in Rodrigues v. The Scotts Company, LLC, 2008 WL 251971 (D. Mass. Jan. 30, 2008), an employee sued under ERISA § 510 after he was discharged for violating the company’s mandatory no-smoking policy.
• The Age Discrimination in Employment Act (“ADEA”): ADEA prohibits employers from discriminating against individuals because of age. Employees may argue that ADEA may be implicated where a mandatory wellness program requires that employees achieve a certain health standard without adjusting for the age of employees.
As health care costs continue to rise, employee wellness programs may provide an opportunity for employers to control expenses by incentivizing and enabling their employees to lead healthier lives and to engage in preventative care. However, before implementing these programs, employers should pay careful attention to ensure compliance with the myriad of applicable federal and state laws. Nevertheless, carefully designed wellness programs that take into account the various legal boundaries can provide substantial benefits for employers and employees alike in terms of lower healthcare costs, better health, and increased productivity.
Jeffrey S. Klein and Nicholas J. Pappas are partners at Weil, Gotshal & Manges LLP, where they practice labor and employment law. Patricia S. Wencelblat, an associate in the firm’s Employment Litigation Group, assisted in the preparation of this article.
Reprinted with permission from the December 7, 2009 edition of the New York Law Journal© 2010 ALM media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.