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Employee Wellness Plans: Get Your Workplace Into Good (Legal) Shape

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Jenna-BickfordJenna Bickford is an associate at MacDonald, Illig, Jones & Britton LLP. She practices in the areas of Business Transactions, Real Estate, Government Services and Health Care. She can be reached at jbickford@mijb.com or by calling 814/870-7762.


With employee health benefit costs on the rise, employers are looking for ways to save. One approach is to adopt an employee wellness plan. In concept, a healthier workforce will lead to lower medical care costs — and fewer days of missed work. An employee wellness plan allows an employee to earn a reward, such as a premium discount or a reduced deductible, by either participating in a healthy activity or obtaining a healthy result. In adopting an employee wellness plan, employers must exercise caution as numerous laws apply. Some key legal requirements are summarized below.

HIPAA / Affordable Care Act
Employee wellness plans cannot discriminate; all employees must have the opportunity to participate. In some plans, employees earn a reward solely by participating. For example, employees may earn a lower deductible by attending a health education seminar or getting a flu shot. These plans do not discriminate
because all employees can earn the reward.

In health-contingent plans, employees earn a reward only if they achieve a particular result. These plans must be available to all employees and must permit employees to attempt to earn the reward at least once per year. Additionally, a reasonable alternative must be provided to employees who are unable to achieve the result due to a medical condition and the plan disclosure materials must describe the alternative.

For example, a plan may provide a reduced premium for employees who do not smoke or, as an alternative, who attend a smoking cessation program, regardless of whether employees stop smoking. The reward in health-contingent plans is capped at 30 percent of the employee’s cost of coverage or 50 percent if the plan is related to reducing tobacco use.

HIPAA Privacy and Security
HIPAA, which protects the privacy and security of protected health information (“PHI”), applies to, among others, employer-sponsored group health plans. So, PHI
that is collected from, or created about, employees in a wellness plan may be protected. If an employer, as plan sponsor, administers the plan, the plan documents
must: a) establish separation between employees who perform plan functions and those who do not; b) prevent use of PHI for employment-related actions or other purposes not permitted by HIPAA; and, c) implement safeguards to ensure the security of electronic PHI. If a breach of unsecured PHI occurs, HIPAA requires that notifications be made and remedial measures be taken.

Americans with Disabilities Act
Under the ADA, employee wellness plans may not discriminate based on a disability. Obesity may be a disability if it limits a major life activity. If a wellness plan’s reward is based upon a healthy weight, an alternative may be needed, such as participating in a healthy lifestyle program, regardless of whether employees achieve a healthy weight. Also, voluntary health examinations conducted as part of wellness plans must be kept confidential and separate from employment files.

Genetic Information
Nondiscrimination Act Because genetic information is uniquely protected, employee wellness plan questionnaires should not request genetic information. If genetic testing services are offered, results should remain confidential between the licensed professional administering the test and the employee.

While employee wellness plans can be a valuable part of employee benefit plans, by improving workforce health and reducing health-care costs, employers must ensure the plans are legally compliant. If you need assistance getting your employee wellness plan in good (legal) shape, please contact an attorney at MacDonald Illig.