Employment-Based Wellness Programs Require Careful Design

health-and-wellnessEmployers that offer certain programs designed to improve employee health must be mindful that such programs are subject to a number of different laws–and as recent guidance makes clear, compliance with one law does not necessarily mean that a wellness program will comply with other federal (or state) requirements.

Wellness Programs and HIPAA Nondiscrimination Rules
The federal Health Insurance Portability and Accountability Act (HIPAA) imposes several requirements on health-contingent wellness programs, i.e., those that require an individual to satisfy a standard related to a health factor to obtain a reward. Participatory wellness programs, which comprise a majority of wellness programs, are generally available without regard to an individual’s health status.

Among other things, health-contingent wellness programs must be reasonably designed to promote health or prevent disease and must limit the maximum permissible reward to 30% of the cost of coverage (or 50% for wellness programs designed to prevent or reduce tobacco use). A new set of FAQs explains what it means for a health-contingent wellness program to be “reasonably designed.” The FAQs also caution that compliance with HIPAA does not determine compliance with other federal or state laws.

The ADA and Wellness Programs
The federal Americans with Disabilities Act (ADA) restricts covered employers from obtaining medical information from employees, but allows medical examinations of employees and inquiries about their health if they are part of a “voluntary employee health program.”

A new proposed rule provides that a wellness program is considered an employee health program within the meaning of the ADA when it is reasonably designed to promote health or prevent disease (similar to the standard currently applicable to health-contingent wellness programs). In addition, the proposed rule:

  • Details several requirements that must be met in order for participation to be considered voluntary, and requires employers to provide employees with a notice clearly explaining what medical information will be obtained, who will receive it, how it will be used, and how it will be kept confidential.
  • Allows employers to offer limited incentives for employees to participate in wellness programs or to achieve certain health outcomes. The total allowable incentive available under all wellness programs (i.e., both health-contingent and participatory programs) may not exceed 30% of the total cost of employee-only coverage.
  • Addresses the confidentiality requirements that apply to the medical information employees provide when they participate in wellness programs.
  • Requires employers to provide reasonable accommodations that enable employees with disabilities to participate and to earn whatever incentives the employer offers.

Due to the changing law and the complexity of the requirements that apply to employment-based wellness programs, employers are advised to check with a knowledgeable employment law attorney to ensure that any program complies with all applicable federal and state laws.

Our section on Wellness Programs provides additional details.

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