Staying Well: Side Effects of Workplace Wellness Plans

Transcription

1 ISSUE ANALYSIS Staying Well: Side Effects of Workplace Wellness Plans By Meghann Kantke and Matthew Webster, Gray Plant Mooty Even for employers with the best of intentions, workplace wellness plans carry risk. Many employers remain unaware that wellness plans are subject to a potent cocktail of federal and state laws and regulations, including antidiscrimination laws, disability accommodation requirements, and privacy protections. Though often heralded as a perfect prescription for employees and employers alike, a lack of due diligence can result in unwelcome side effects. Despite the myriad legal issues involved in implementing a workplace wellness plan, more and more employers are signing up. By some estimates, over half of US employers have adopted employee wellness initiatives to a varying degree. Because of the rapid evolution and popularity of wellness plans, both federal and state compliance obligations are in a state of flux as legislatures, regulatory agencies and courts play catch up around the country. It is clear, however, that wellness plans do carry some legal risks 43

2 absent appropriate due diligence by employers. The Equal Employment Opportunity Commission ( EEOC ), the federal agency tasked with enforcement of federal anti-discrimination laws, continues to target workplace wellness programs for increased scrutiny. In 2014, the EEOC filed three landmark lawsuits against small and large employers, including Minnesota-based Honeywell, claiming that the employers wellness programs violated federal law. In late 2015, the EEOC also announced new proposed regulations for these programs. These regulations, once final, will hopefully provide employers some useful guidance for implementing workplace wellness programs, but they are unlikely to resolve all complexities and will not absolve employers of their responsibility to carefully craft and manage their programs to ensure compliance. Employers Must Take the HIPAA-cratic Oath Organizations with workplace wellness programs must comply with the nondiscrimination requirements of the federal Health Insurance Portability and Accountability Act ( HIPAA ). Generally speaking, HIPAA prohibits employers from discriminating in employee health plan options and related contributions based on a health factor. Health factors include items such as genetics, disabilities, receipt of healthcare, and health status. If an employer s wellness program does not offer a reward or if the reward is not based on satisfying a certain health factor, then the program likely complies with HIPAA. If, however, wellness program rewards are contingent on the analysis of a health factor, the program will only comply with HIPAA if it meets the five factors of the HIPAA safe harbor provision. Those factors are as follows: 1. The total reward must be limited so as to be an incentive rather than a penalty (generally under 20% of the total employee cost); 2. The program must be reasonably designed to promote health or prevent disease, which means that it should be based on scientific studies; 3. Participation eligibility for the reward must be offered at least once a year; 4. The reward must be available to all similarly situated individuals (while also providing a reasonable alternative standard or waiver of the standard, where applicable); and 5. The plan must disclose the entire program description (including reasonable alternative standards or waivers). Wellness program rewards must be carefully planned and executed in order to fully comply with an employer s HIPAA obligations. What Other Laws Apply? The Affordable Care Act ( ACA ) regulations, effective January 1, 44

3 2014, expanded opportunities for employers to implement outcome-based wellness programs, which are permitted under HIPAA and the ACA as long as the programs meet the requirements outlined above. Outcome-based wellness programs reward an individual who satisfies a standard related to a health factor, such as lowering blood pressure or quitting smoking. The 2014 regulations allow employers to offer incentives to individuals that total up to 30% of the annual cost of health coverage. But, other federal laws may prohibit what the ACA and HIPAA seem to permit. Among those laws are: the federal Americans with Disabilities Act ( ADA ); the federal Genetic Information Non-Discrimination Act ( GINA ); the federal Age Discrimination in Employment Act ( ADEA ); state employment discrimination statutes; state lawful consumable product laws which typically prohibit discrimination based on an employee s use of a lawful product, like tobacco, outside of work; and privacy laws. Remember the ADA: When Wellness Goals and Disability Protections Collide The ADA makes it unlawful to discriminate on the basis of qualifying disability, the definition of which is very broad. A disability is defined to include any physical or mental condition that substantially limits a major life activity. Major life activities include, among other things, major bodily functions, such as organ function. So, an employer might find that, in targeting high blood pressure, cholesterol, or Body Mass Index ( BMI ) for wellness initiatives, it is also indirectly targeting the conditions that cause them. Those underlying conditions may very well be disabilities protected from discrimination by the ADA. For example, an employee may be overweight because of diabetes, which is a disability. Another example, an employee s high blood pressure, may be due to chronic kidney disease, which is also a disability. Or, an employee s cholesterol may be the result of hypothyroidism, which is a disability. These employees may not have the ability to satisfy the outcome standard put in place for the wellness plan, and, therefore, could not obtain the incentive being offered to employees who do meet that standard. It is, under the ADA, unlawful discrimination to deny these employees benefits offered through a wellness program because they are disabled. What s an employer to do then? One solution is to make appropriate reasonable disability accommodations. Employers could, for example, accommodate disabled employees by offering reasonable, appropriate means by which the same wellness plan benefit may be obtained. Alternatively, employers may consider participation-based programs that reward effort rather than outcome-based programs that reward results. Participation-based wellness programs pose less risk than outcome-based initiatives, but employers still must analyze whether they are excluding 45

4 disabled employees from accessing benefits offered through the program. For example, if as part of a wellness program employees receive a gift card for signing up to participate in a walk-a-thon, it would be important that employees who cannot walk can still sign up and/or receive the gift card for doing something comparable. The Choice Is Theirs: Wellness Programs Must Be Truly Voluntary In addition to prohibiting discrimination, the ADA and other nondiscrimination laws prohibit employers from making certain inquiries about employee health. Under the ADA, employers can only make disability-related inquiries and/or require employees to submit to medical examinations if the inquiries and examinations are 1) job-related; and 2) consistent with business necessity. More often than not, employers wellness initiatives are not going to meet these requirements. There is, however, an exception that is helpful in the wellness plan context. The ADA allows collection of medical information for voluntary programs aimed at identifying and treating common health problems, such as high blood pressure and cholesterol. The key here, however, is the word voluntary. The EEOC has interpreted the voluntariness exception to mean that: Employers may not require employees to participate in wellness programs; and Employers may not penalize employees for choosing not to participate in such programs. To comply with these requirements, an employer must consider both the incentives it is offering as well as the workplace culture around wellness initiatives. If the incentive to participate in a wellness program is merely to allow employees to continue a benefit they already have, what the employer is really doing is penalizing employees who do not participate. Moreover, if the boss visits an employee s desk to urge her to participate in wellness screening, that employee may not feel like she really has a choice. A truly voluntary program is also important under GINA. GINA prohibits employment discrimination based on genetic information, which is broadly defined to include much more than DNA. Genetic information includes an individual s genetic tests both the fact of an individual s participation in the test and the results and information about the manifestation of a disease or disorder in an individual s family member. Wellness screenings or other initiatives that seek information about an employee s family medical history, or that separately incentivize an employee s family member(s) for participating, may violate GINA if the employee cannot obtain whatever incentive is offered without turning over protected information. In addition, GINA regulations require that the 46

5 employer secure written authorization from the employee to obtain the information, and that the written authorization form is easy to understand, describes the type of genetic information that will be obtained and how it will be used, and describes restrictions on disclosure of genetic information. In October 2015, the EEOC issued proposed regulations for wellness programs under GINA. The proposed regulations make clear that wellness programs which are part of a group health plan and which collect information about current or past health status cannot offer total incentives exceeding thirty percent of the total cost of the plan for the employee and all enrollees. This thirty-percent limitation applies to all incentives, whether financial or in-kind incentives such as awards or prizes. These proposed rules mark a shift from the EEOC s previous interpretation of GINA, which brings it more into conformity with similar interpretations under the ADA, HIPAA, and ACA. The EEOC accepted comments through December 29, 2015, and the proposed rules are expected to be published in Managing Wellness Information: Keep It Safe The ADA, GINA, HIPAA and other laws restrict when and what health information employers may obtain, and they also bear on how any health information that is legally gathered is handled. The ADA requires that medical information about employees be kept confidential and that it is stored securely and separately from other personnel information. Also, employers must be mindful of restrictions on disclosure of that information to anyone other than the employee. There is also some risk in even possessing employees medical and health information. When the employer has and knows this information, there is an increased risk that an employee may allege that health information was improperly used in making employment decisions. Employers can help protect themselves by keeping all health information out of the hands of those who assess employees performance and/or make decisions about discipline or promotions. Beware the Unintended Side Effects of Wellness Programs The ADEA and Title VII of the Civil Rights Act of 1964 can also be implicated if a wellness program disparately impact individuals in legally protected classes, such as women, individuals of color, or individuals age 40 or over. To get an all clear under the ADEA, mandatory wellness programs must reasonably account for the prospective limitations of older workers. Like actual medical care regimens, wellness programs work best when they are not one size fits all. 47

6 Similarly, wellness programs run the risk of complications if they impose higher costs disproportionately on individuals in protected classes. For example, a wellness program which provided rewards for certain health outcomes but failed to account for biological differences between men and women such as average higher Body Mass Index ( BMI ) numbers for women could violate Title VII s prohibition of sex discrimination. Likewise, a wellness program which set specific goals for blood pressure readings would likely have a disparate impact on certain racial groups and various national origin groups, which could create liability under state discrimination statutes. To ward off legal trouble, employers should ensure any wellness program is flexible enough to allow all employees to participate in rewards and be measured, if at all, in a manner that accounts for inherent differences between employees. Big Data: The Next Frontier in Wellness (and Wellness Plan Problems) Increasingly, it is popular for employers to adopt wellness programs that involve data mining. According to some sources, organizations ranging from the Colorado state government to Wal-Mart Stores, Inc. are hiring outside firms to gather data through wellness programs in order to identify at-risk employees and to make targeted, anonymous health recommendations. These data-mining organizations analyze items such as participants credit scores, purchase receipts, prescriptions and treatments, midterm voting records, and insurance claims. Using this data, these organizations are able to make predictions (e.g., an employee with a gym membership is likely healthier than an employee with a high bar tab) and to make individualized suggestions to participants (e.g., suggest a second opinion or physical therapy before opting for invasive surgery). While data mining may allow a wellness program to have a greater impact on employee health and employer insurance costs, employers should consider the potential for legal costs that might swallow other potential cost savings. ADA and GINA compliance obligations can all be potentially impacted by data mining that is done without proper care. The more data employers gather, even throughout outside organizations, the higher the potential for a privacy violation. A CASE STUDY: Flambeau, Inc. A recent lawsuit involving a wellness program highlights many of the legal considerations facing employers when implementing such plans. The case involved an international plastics manufacturer with a facility in Wisconsin that instituted a wellness program. The manufacturer s health insurance was self-funded and self-insured, and participation in the health 48

7 insurance plan was voluntary. The employee wellness program at issue included two components (1) a health risk assessment and (2) a biometric test. The biometric test included a blood draw, blood pressure test, and height and weight measurements. The assessment included a questionnaire about employee medical history and health habits, and the employees responsive information was reported to the company in the aggregate except for information regarding tobacco use. The health risk assessment information was used to estimate insurance costs, setting premiums and adjusting copays. The manufacturing employer also sponsored company-wide events and programs including weight-loss competitions and modified vending machine options. The employer initially provided a $600 credit for participation and completion of the health risk assessments and biometric tests. Later, the employer eliminated the credit and instead offered health insurance to employees who had completed the wellness program. After an employee lost his coverage because he failed to complete the wellness program, he filed a union grievance and then filed a federal lawsuit alleging that the wellness program violated the ADA. The federal judge dismissed the complaint, finding that the employer s wellness program was lawful because it was a term of the employer s benefit plan, was part of the underwriting risk assessment, and was not a subterfuge for unlawful activity. Central to the federal decision was that no evidence was offered that the employer used the gathered health information to make disability-related distinctions to employees benefits. Conclusion As healthcare costs continue to increase and both employers and employees look to decrease these costs and achieve better health outcomes, wellness programs will only continue to increase in number and complexity. Similarly, legal compliance obligations will likely continue to evolve. Employers are well-advised to periodically assess the fitness and wellbeing of their wellness programs to ensure they are both legal and effective. 49