WV Executive

MORE AND MORE EMPLOYERS are offering wellness and health promotion programs aimed at promoting the health and well-being of employees and their families. The driving force for most employers is the rising cost of health insurance, disability leave and sick leave benefi ts, and the high cost of healthrelated insurance and disability/sick leave benefits is compounded by the lost productivity of an increasing number of employees off work, using their employerprovided health and leave benefi ts due to illnesses that are considered largely preventable. In 1994 alone, the United States Department of Health and Human Services found that obesity-related health problems cost employers in the United States approximately $13 billion, including $8 billion for health insurance, $2.4 billion for sick leave and almost $1 billion in disability insurance.

Furthermore, the incidence of obesity is on the rise in the United States. Since obesity is associated with an increased risk for many chronic illnesses, health care is higher for the obese than for individuals of a healthy weight. The study entitled "Why Obesity Lowers Wages" by the National Bureau of Economic Research found that the health care costs associated with obesity may be passed on to obese workers with employer-sponsored health insurance in the form of lower cash wages. Add the health care costs to the lost productivity of chronically ill employees, and there you see the problem employers face.

Enter the employee wellness/health promotion movement. Employers should seek to combat the costs associated with their chronically ill employees by offering various programs that promote the mental and physical health, and overall well-being, of their employees. Wellness programs can be as simple as offering smoking cessation programs to employees or sponsoring periodic classes/seminars for employees on health-related topics (such as healthy eating habits) and offering employees on-site fitness facilities. These programs are geared towards the prevention of chronic illnesses by promoting healthy and active lifestyles and often include promoting and encouraging employee involvement in fitness-related activities in the community and voluntary health screenings, including cholesterol screenings, blood pressure and blood sugar screenings and breast cancer or skin cancer screenings. Coupled with incentives to advance employee participation, wellness programs can help employers reduce health insurance costs and sick leave use and increase employee productivity-a healthy employee is a happy employee and will miss less work due to illness.

These programs have proven to be a cost-effective solution for employers. For example, a three-year blood pressure control program at Ford Motor Company returned $1.89 to $2.72 in unused health claims for every $1 invested, according to the Employment Coordinator Personnel Manual for General Motors Corporation and three small businesses ranging in size from five to 296 employees saw results similar to Ford after offering employees screening and counseling for blood pressure, cholesterol, cigarette smoking, weight control and physical fitness. Employers must be aware, however, that their wellness programs may have hidden costs in the form of potential liability directly related to their wellness activities.

Legal Considerations and Potential Liability Issues

Many employers use financial incentives to encourage participation in their wellness programs. Employers may offer rebates on health insurance premiums, modified insurance deductibles or co-payments for employees who adhere to wellness or disease prevention programs or even cash bonuses. However, employers must design such incentives to reward positive health habits without discriminating based on health conditions. Specifi cally, the Health Insurance Portability and Accountability Act ("HIPAA") considers conditioning a premium discount or rebate on achievement of specifi c goals-such as reducing weight to a certain level-a form of illegal discrimination based on health status. HIPAA's nondiscrimination provisions generally prohibit a group health plan or group health insurance provider from denying an individual eligibility for benefi ts based on a health factor and from charging an individual a higher premium than a "similarly situated" individual based on a health factor. Under the regulations promulgated by the Department of Labor (DOL), "health factors" include health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence) and disability. However, there is a critical exception which provides that plans may vary benefi ts (including cost-sharing mechanisms) and premiums or contributions based on whether an individual has met the standards of a wellness program as defi ned by the DOL's regulations. In order to qualify for the exception, the employer's wellness program must fi t the DOL's definition.

What is a wellness program? The DOL has issued comprehensive regulations on this issue, which apply to group health plans and group health insurance issuers on the fi rst day of the plan year beginning on or after July 1, 2007. The regulations describe a wellness program as "any program designed to promote health or prevent disease." A wide range of wellness programs exist to promote health and prevent disease; however, these programs are not always labeled "wellness programs." Other common names include: disease management programs, smoking cessation programs and case management programs. The DOL says that wellness programs must include a program that reduces the individual's cost-sharing for complying with a preventive care plan; a diagnostic testing program for health problems and rewards for attending educational classes, following healthy lifestyle recommendations or meeting certain biometric targets (such as weight, cholesterol, nicotine use or blood pressure targets).

Employers must beware, though, because a wellness plan will violate the law if it requires an individual to meet a standard related to a health factor in order to obtain a reward. Such an illegal reward can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as deductibles, co-payments or coinsurance), the absence of a surcharge or the value of a benefit that would otherwise not be provided under the plan. For example, a plan cannot provide that participants who have a cholesterol level under 200 will receive a premium reduction of 20 percent because the plan improperly requires individuals to meet a standard related to a health factor in order to obtain a reward. Thus, it "discriminates based on a health factor." It is important to note that the employer's wellness program is only subject to these regulations if it is part of a group health plan. If the employer operates the wellness program as an employment policy separate from the group health plan, the program may be covered by other laws but it is not subject to the group health plan rules.

The Americans with Disabilities Act (ADA) and its state counterpart, the West Virginia Human Rights Act, prohibits, among other things, discrimination in the workplace against individuals with a legally defi ned disability. These statutes have ramifi cations for employers who wish to implement wellness programs. Although there is little specifi c guidance by the state law, the ADA outlines specifi c criteria for a valid employee wellness program. In order for a program to be valid, the following requirements must be met:
. all components of the program must be voluntary;
. strict confi dentiality of all medical records must be maintained;
. health risk appraisals, medical and health questionnaires and medical screening tests cannot be mandatory;
. post-employment physical examinations cannot be required, unless they are jobrelated and consistent with business necessity and
. employees' medical information must be maintained separately from personnel fi les, with access limitations clearly defined.

Furthermore, financial incentives to encourage employee participation in wellness programs are permissible under ADA, but, like under federal benefits legislation, employers cannot tie such incentives to test results.

In addition, employers must also be aware of other potential sources of liability related to their employee wellness plans. For example, many wellness plans include health screening. Commonly, employers contract with an outside vendor that comes to the workplace and administers the screening. An employee could be harmed by an incorrect referral or the failure of an employee of the contract service to recognize the severity of an employee's health problem. Similarly, employers offering wellness programs should ensure that health and fi tness information they provide to employees, either directly or through an instructor or service provider, is medically accurate.

Indeed, many potential sources of liability may arise from outside vendors an employer chooses to contract with to administer and/or provide services to its employees under a wellness program. An employee may be subjected to an invasion of privacy should the service fail to keep an employee's results private or publicizes the results in some manner. In addition, an employer can be held for defamation or otherwise harming an employee's reputation through disclosure of information about a condition or problem to others. Moreover, information about an employee's health status, including the results of a voluntary health screening, is considered a medical record under ADA and must be kept strictly confidential. An employer can be liable for revealing medical information to a third party such as an insurance company or third-party vendor without an employee's consent.

The prevalence of employer-sponsored wellness programs and health promotion programs continues to grow because such programs have proven to be a cost-effective solution to increased health care costs and lower productivity associated with employee absences due to illnesses. As these plans are developed, every employer must be mindful of the legal landscape to ensure that well intended efforts do not cause major legal headaches.