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Are wellness programs worth it?

January 8th, 2015  |  Lorene Park

By Lorene D. Park, J.D.

In a perfect world, employees maintain a healthy weight, exercise, refrain from smoking or drinking alcohol, properly manage their health conditions, never lose productivity or miss a day of work due to illness, and cost little in terms of healthcare. This is not a perfect world, however, and employers are increasingly relying on wellness programs (according to a 2014 SHRM/EBRI survey, among other indicia) to encourage employees to improve their health. Usually this is done as a cost-saving measure, and it is certainly encouraged by the Patient Protection and Affordable Care Act, as noted by a DOL fact sheet. But are wellness programs worth it?

Effectiveness of wellness programs questioned. According to a 2014 Chief HR Officer Data Survey compiled by Consero Group, nearly half of HR chiefs reported that their wellness programs are ineffective and more than half indicated the programs have not significantly reduced costs. In addition, a study released by the RAND Corporation, which investigated the experiences of over 67,000 employees of PepsiCo over the course of seven years, suggested that while wellness programs may reduce health care costs for employees who have chronic illnesses, the lifestyle management aspects of the programs do not exhibit a similar return.

Medical inquiries challenged by EEOC. In addition to these reports, which call into question the effectiveness of wellness programs, the EEOC has been giving wellness programs special attention—and not in a good way. The latest challenges have taken issue with their “involuntary” nature. Basically, medical inquiries of current employees that are part of wellness programs are acceptable under the ADA if they are voluntary and if the results are kept confidential and separate from personnel records. But the ADA and its implementing regulations do not define “voluntary,” leaving room for doubt—expensive, lawsuit-worthy doubt. According to an EEOC guidance, a “wellness program is ‘voluntary’ so long as an employer neither requires participation nor penalizes employees who do not participate.” But penalties come in a variety of forms.

In EEOC v. Honeywell, the EEOC has alleged that biomedical testing associated with a wellness program violates the ADA because employees face penalties to induce them to go through screening for health risks like high blood pressure and high cholesterol. The EEOC further alleged that Honeywell violated the Genetic Information Nondiscrimination Act (GINA) by penalizing employees whose spouses did not complete the screening. Among other penalties, employees who do not participate face the withholding of health savings account contributions. Moreover, employees (and spouses) who refuse to undergo biomedical testing are presumed to be tobacco users and face a $1,000 nicotine surcharge. The court in Honeywell recently denied the EEOC’s motion for a preliminary injunction barring the penalties at issue because it found no risk of irreparable harm (employees could be compensated monetarily) and noted that the likelihood of success on the merits was an open question.

In addition to Honeywell, the EEOC issued an October 2014 press release announcing a suit against Flambeau, Inc., a plastics manufacturing company. The Flambeau complaint alleged that the company violated the ADA by requiring medical testing and assessment in connection with its wellness program at the risk of “dire consequences,” including unspecified “disciplinary action.” The agency also recently announced a similar suit filed against Orion Energy Systems. The Orion complaint alleged that the company violated the ADA by requiring medical exams that were not job-related and consistent with business necessity as part of its wellness program and then firing an employee when she objected.

Based on the foregoing, it appears that wellness programs are moving to the forefront of the EEOC’s enforcement efforts.

Are wellness programs worth it? Given the studies questioning whether wellness programs are having the desired results; the potential for liability under the ADA, GINA, HIPAA, and other applicable law; and the apparent uncertainty in what exactly is expected from employers in this evolving area of law, the question is: Are wellness programs worth it? Obviously, individual employers must answer that question for themselves. But it clearly is a question they should be asking.

One would hope the proposed rules that the EEOC plans to publish in February 2015 for the ADA and for GINA will provide further guidance in evaluating a future course of action. In the meantime, employers should assess existing wellness program requirements to ensure that the program is voluntary, that it imposes no penalties on those who do not participate, that any medical inquiries are job-related and consistent with business necessity, and that results of medical inquiries are kept confidential and separate from personnel records.