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As the wellness industry focuses more on reducing employees' health risks by improving their behavior, employers must ensure their programs remain within the bounds of the law and their own corporate culture.
A host of federal and state laws regulate the extent to which employers can impose a health management strategy on employees, particularly strategies including aggressive wellness programming and incentive structures.
Benefits managers and wellness administrators also must not to let their programming take an authoritarian tone, or risk exceeding employees' tolerance of employer-provided health management education and support (see related story).
Forty-two percent of employers polled in Eden Prairie, Minnesota-based Optum Inc.'s 2014 Wellness in the Workplace Survey offer financial incentives tied to measurable improvements in employees' health outcomes — such as achieving or maintaining a healthy weight, reducing their cholesterol or quitting smoking — compared with 37% in 2013.
Additionally, 52% of employers said they offer financial rewards to employees who complete health related activities, and 46% have nonparticipation penalties in their incentive structures.
“It takes quite some time for individuals to change their behavior, and they have to be motivated to do it,” said Beena Thomas, Atlanta-based vice president of health and wellness at Optum. “Incentives can play a strong role and we have seen a trend of employers moving away from incentives based on participation and towards incentives that are keyed on results.”
Another study, released in May by Chicago-based benefits consulting firm Bswift L.L.C., found that while only 17% of employers saw participation rates of at least 75% in their wellness programs, up to 39% reached that level if they offered programs with outcome-based incentives of $250 or more per employee.
Even without incentives, a workplace wellness strategy that expands beyond basic educational programming carries regulatory obligations, experts said.
For example, many employers have taken steps to eliminate or strongly discourage smoking among their employees, in some cases limiting health benefit options or penalizing employees who test positive for nicotine. However, several states bar employer discrimination based on employee use of tobacco and other legal products when they are not at work.
Starting this year, employers offering activity- or outcome-based financial incentives are required under the Health Information Portability and Accountability Act to offer “reasonable alternative standards” to employees who are unable to meet the initial program objective.
If the first alternative offered is deemed medically inappropriate or unattainable by an employee's personal physician, the employer must offer a second alternative that abides by the physician's recommendations.
Although similar regulations on outcome-based incentives existed under HIPAA prior to finalization of expanded rules under the Patient Protection and Affordable Care Act in March 2013, 24% of employers offering outcome-based wellness incentives still were not providing reasonable alternatives by the end of the year, according to Willis North America Inc.'s 2014 Health and Productivity Survey.
“That probably reflects variations in the level of knowledge and sophistication employers have when it comes to wellness programs,” said Ron Leopold, Atlanta-based health outcomes practice leader at Willis, adding that the 2014 results were a marked improvement from 42% of employers not offering required alternative standards for outcome-based incentives in last year's survey.
Experts said many employers have expressed even greater confusion over the extent to which incentivized activities such as diet, fitness and smoking-cessation programs, which employers have offered for years but have been subject to HIPAA only since the beginning of this year.
Under the expanded rules, employers must offer reasonable alternative incentive standards using most of the same guidelines that apply to outcome-based incentives, with the exception that the alternatives need be made available only to employees who are medically unable to meet an initial activity-based goal.
“Prior to the rule changes under PPACA, there was no such thing as an "activity-based' wellness program,” said Rachel Cutler Shim, a Philadelphia-based tax, benefits and wealth planning attorney at Reed Smith L.L.P.
Employers also may be required under the Americans with Disabilities Act to provide reasonable alternative incentive standards to employees who cannot achieve initial incentive goals because of a recognized disability, even if the initial goal is only participation-based, experts said.
“It's one of the riskiest areas when you talk about wellness programs, but particularly so when you get into outcome-based programs and incentives,” said John McKelway Jr., a Boston-based partner in the labor and employment practice at McCarter & English L.L.P. “This is uncharted water, and there are an infinite number of scenarios that no one ever would have thought of.”
Even if their wellness programs comply with all state and federal laws, employers that push too hard to improve the health of their workforce still risk violating their employees' personal boundaries.