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Wellness programs raise legal issues for employers

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Wellness programs raise legal issues for employers

As employers intensify their focus on wellness as a means of reducing health care costs, lawsuits filed by workers, regulators and unions are becoming more common, wellness compliance experts say.

Accusations against employers in recent years include discrimination, violation of medical privacy, violation of benefit reporting requirements and tax obligations, and breach of collective bargaining agreements.

“It's certainly a growing area of the law,” said Ricki Roer, a New York-based partner with law firm Wilson Elser Moskowitz Edelman & Dicker L.L.P. “These types of programs are becoming more and more a part of our workplace environment. So these issues are going to continue to evolve.”

Wellness programs that are entirely voluntary and education-based are the safest legal option for middle-market employers, Ms. Roer said.

However, experts say, such programs often produce little in the way of measurable benefits to employers or their workers. To boost returns, more employers are requiring workers to submit to health risk assessments and biometric screenings, offering financial incentives or penalties, and even administering certain medical care.

“Especially in the middle market, when our clients start talking to us about wellness programs, they usually start out with online coaching tools and lunch-and-learns,” said Ed Fensholt, senior vp and director of compliance services at Lockton Cos. L.L.C. in Kansas City, Mo. “It's pretty benign stuff, but they rarely get the results that they want, which is ultimately a healthier workforce.”

Programs on the more aggressive end of wellness and behavioral health management can be subject to provisions of several federal and state laws that can broaden an employer's potential liability, experts said.

Among common compliance issues for middle-market employers is failing to meet federal anti-discrimination statutes under the Americans with Disabilities Act and the Health Insurance Portability and Accountability Act.

HIPAA requires that reasonable alternatives or exceptions be made available for those who are unable to meet a requirement to receive an incentive, regardless of their disability or physical condition.

“In any given population, there may be some individuals who have cancer, a stroke or other serious problem, or who are blind, have no computer, have learning disabilities or have low literacy levels,” said Bob Gorsky, president and senior consultant for health at HPN Worldwide Inc. in Elmhurst, Ill. Companies should examine “what guidelines for exceptions and reasonable alternatives are in place to help these people in ways that optimize a caring culture and goodwill.”

Federal courts have differed in their rulings on the extent of an employee's right to privacy regarding wellness-related requests or requirements for medical information, experts say (see Legal environment remains unclear). Meanwhile, ADA rules prevent companies from making medical inquiries or conducting exams that are not directly related to an employee's job description.

According to the ADA and informal guidance from the Equal Employment Opportunity Commission, ancillary requests for medical information—such as a wellness health risk assessment, biometric screening or blood test—must be completely voluntary.

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Frustratingly, experts noted, few if any courts have directly addressed whether the separate wellness initiatives would qualify as voluntary programs.

“It's definitely something that, within the next 12 to 24 months, is probably going to come to a head,” said Mike Demman, CEO of Omaha, Neb.-based SimplyWell L.L.C. “We see a lot of employers making (wellness participation) mandatory for access to the company's health insurance plan.”

How employee medical data is utilized and maintained is another common source of wellness-related compliance difficulty, experts said. Aside from strict data protection standards and obligations, HIPAA and the ADA bar employers from terminating workers because of a disability or medical condition.

Considering this, “it's incredibly important to limit the data that you as the employer are receiving,” said Sherri Bockhorst, a St. Louis-based principal of health and productivity for Buck Consultants L.L.C.

Generally, experts said, employers' access to workers' medical information should include only what is necessary to pay incentives or apply penalties to avoid even the appearance of taking an employment action based on the data.

“You definitely want to make sure that you're not using the data—or that it can't be alleged that you used the data—to make a hiring or firing decision, or something of that nature,” Mr. Fensholt said.

To some extent, employers can limit compliance issues by hiring an outside third party to administer their wellness program. But that may not totally eliminate their potential liability, experts warn, particularly if they self-fund their health insurance plan.

“Outsourcing is helpful, but it wouldn't be the end of the inquiry,” said Jay Kirschbaum, a practice leader for Willis North America's human capital practice in St. Louis. “If you have a self-funded plan, just farming it out isn't enough to insulate you. You've got to actively monitor the activities of your business partners under the self-funded model.”

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