During a recent conversation with a friend who works for a startup in Silicon Valley, he shared that his employer gave out a FitBit to each employee. If you meet the goal of reaching 10,000 steps per day for one week, you were rewarded with a $100 Amazon gift certificate. This got me thinking—with all the availability of health and bio data, what are the limitations on how an employer may use this data?
Since I teach mindfulness at companies, I also wanted to understand the legal boundaries on what is considered a wellness program and the additional obligations the law imposes on those offering such programs.
Research indicates that programs such as mindfulness can help people decrease stress and anxiety, while increasing focus and concentration. It is no wonder such programs are becoming more popular, but can an employer mandate such a program? To take the question one step further, can the employer mandate that everyone walk around with a biometric device to ensure that the employees are performing at optimal level? Can the employer fire an employee based on the information or data it gathers?
With the additional pressure that just about everyone in the workforce is experiencing, offering wellness programs to employees makes sense for both perception (a company that cares about the well-being of its employees) and increasing profitability.
This area of law is rapidly becoming more complicated by the fact that the way we understand health and wellness is broadening. Health and wellness isn’t simply being screened for known illness, or the lack of disease. It’s more about creating a condition where employees can perform at their peak.
For example, let’s suppose a company gives the option (or incentivizes) getting a wearable biometric device and gathers data in the aggregate. It would then have the ability to track and see how benefits such as “bring your dog to work day” or even a short guided meditation at the office impacts the employees' mood, performance, blood pressure, sleep and other data. Could such programs then fall under a “wellness program?”
To address these issues, I sat down with Jennifer Kraft, a benefits lawyer and partner with the labor and employment law firm Seyfarth Shaw LLP.
Kraft says, “The types of wellness programs companies are offering have evolved. Previously, wellness programs were embedded within medical plans and offered services such as helping employees manage chronic conditions like diabetes. Then there was an increased trend in wellness fairs, and offering flu shots, blood pressure checks and basic blood screenings onsite. Now, we’re seeing a wider variety of wellness program options, including rewards for healthy activities like walking, and nutritional counseling. In the future, I think we’re likely to see technology play a greater role in the types of wellness programs and the delivery of these programs.”
Understanding Types of Wellness Programs and Legal Requirements
Kraft says, “There are many reasons why employers offer wellness plans, both tangible and non-tangible." The tangible benefits many employers seek include reduced absenteeism, increased presenteeism, reduced turnover and lower healthcare costs. Additionally, wellness programs may increase focus and productivity at the workplace. Some of the non-tangible benefits associated with wellness programs include awareness of the importance of wellness and improved morale.
When it comes to offering wellness programs at the workplace, employers should keep in mind the legal implications and requirements surrounding wellness programs. For example, regulations under the Health Insurance Portability and Accountability Act (HIPAA) and the Americans with Disabilities Act (ADA) include legal requirements for wellness programs.
Unfortunately, often these regulations don’t fit nicely with each other, creating conflict and confusion. In addition, if the wellness benefits aren’t considered medical care or don’t fit within another exclusion, they may be taxable to the employee as well, as noted in recent IRS guidance.
The HIPAA rules start from a requirement prohibiting discrimination against individuals due to their health status.
HIPAA includes an exception, however, for programs that meet the HIPAA wellness rules. These rules were largely codified by the Affordable Care Act. Under these rules, wellness programs fall into two general categories—participatory and health-contingent.
- Participatory programs do not require any specific condition to be met to receive the reward. These programs can include reimbursement for a fitness center membership, or even rewarding employees for completing a health risk assessment or a biometric screening, without requiring the employee to do anything else.
- Health-contingent wellness programs are either activity-only or outcome-based.
- Activity-only wellness programs reward individuals simply for performing a health factor-related activity, such as a program requiring an individual to walk two times a week.
- Outcome-based wellness programs go a step further and require a specific outcome. For example, individuals who have a certain cholesterol level receive a reward.
The HIPAA regulations limit the maximum reward that can be provided for health-contingent programs (30% of the cost of coverage, or 50% of the cost of coverage in certain cases designed to prevent tobacco use). HIPAA also requires certain notices be provided and reasonable alternatives be available for individuals to receive these rewards in certain circumstances.
Adding a layer of complexity, however, are the EEOC regulations for wellness programs under the ADA which were finalized earlier this year. The EEOC regulations don’t make distinctions based on whether a program is participatory or health-contingent as the HIPAA rules do.
Instead, the EEOC takes the position that wellness programs that require answering a disability-related question or some type of medical exam must meet certain standards to make sure the program is “voluntary” for purposes of the ADA. This voluntary standard includes its own, different notice requirements and limits on the size of the wellness program reward.
In addition to the limits on rewards and requirements for wellness programs under HIPAA and the EEOC regulations, many wellness programs are considered “group health plans” under the Employee Retirement Income Security Act (“ERISA”).
Under ERISA, an employer program that provides medical care is considered a group health plan. Medical care for these purposes includes the diagnosis, cure, mitigation, treatment or prevention of disease. If a program is an ERISA plan, it is subject to a number of other regulatory requirements including plan documentation, Form 5500 reporting and COBRA continuation coverage.
Kraft says, “ERISA’s broad definition of group health plans can sweep in a number of wellness programs employers may not be thinking of as part of their ERISA compliance, such as on-site wellness fairs, biometric screenings and flu shots.”
HIPAA also includes restrictions on how group health plan information may be used. Under HIPAA, any information a group health plan receives about the employee’s medical or health issues cannot be used to make employment decisions. In addition, the plan administrator at the company must take steps to ensure that such data remain confidential. However, the company may gather and review aggregate, de-identified data.
Given the rapid changes in the amount of health data that is available, and existing law, Kraft suggests employers:
- Review their wellness programs to determine if they are ERISA group health plans and, if so, meeting the ERISA standards.
- Make sure their wellness programs are meeting all the applicable legal requirements (including HIPAA and the ADA reward size limits, notice and reasonable alternatives requirements).
- Review their HIPAA privacy and security compliance to help protect their employees’ health information.
