Corporate Wellness - Is it Healthy for Employers?

 In an unhealthy economy, keeping employees healthy may be a way for employers cut costs while attracting and retaining talent.

There are many employer benefits to having a healthier workforce.  Healthy employees may be absent less, take fewer leaves of absence, be more productive, work longer, and have a better overall quality of life.   In addition, and probably most important to most businesses, employers may pay less for health insurance.  With these goals in mind, many employers are implementing corporate wellness initiatives. 

Effective corporate wellness programs identify and reduce risks and educate and motivate employees to improve individual health.  Discounts or penalties on health care premiums, health exams and screenings, health coaches, energy management exercises, weight-loss and smoking cessation programs, and rewards such as gift cards or vacations are a few approaches used by employers.  Some employers go even further and implement outright restrictions on employment or health insurance based on weight, smoking, and even hazardous activities, such as skydiving.  While the results may be beneficial to both employers or employees, the end won’t necessarily justify the means.  Unless implemented properly, efforts to improve employee health can face challenges from several fronts, including claims of invasion of privacy and unlawful discrimination.

Many corporate wellness initiatives are about behavior that occurs outside of work.  Most workplaces are non-smoking, but many employers don’t want their employees to smoke at all.  Employers can offer only healthy food and snacks in the cafeteria, but that doesn’t help if the employee eats junk and fast food the rest of the time.  But employer attempts to regulate or prohibit such “outside” behavior and to monitor employee compliance can give rise to claims for invasion of privacy. 



Another potential source of privacy rights for employees is the Health Insurance Portability and Accountability Act (“HIPAA”), which protects the privacy of personal health information. HIPAA nondiscrimination regulations regarding “bona fide wellness programs” require that wellness programs be designed to promote good health; allow for annual qualification; make awards available to all similarly-situated individuals; and, provide a reasonable alternative, and notice thereof, to employees unable to comply with program requirements due to a medical condition. Under the recently promulgated regulations, the value of rewards (such as discounts, contribution rebates, or waiver of cost-sharing requirements) for the wellness program is limited to 20% of the unsubsidized cost of employee-only coverage under the health insurance plan. Compliance with HIPAA, however, does not mean a program will survive challenges on other grounds, such as discrimination.


 Some employees may feel harassed or discriminated against when faced with healthy workplace initiatives.  Employees may claim that they are treated differently because of their protected status (“disparate treatment”), or that their employer’s policy or practice adversely impacts a protected group (“disparate impact”).    Accordingly, wellness program participation, use and confidentiality of employee health information, and screening must be consistent with federal, state and local anti-discrimination laws.


The Americans with Disabilities Act (“ADA”) - which was recently amended to expand its protections - for example, prohibits discrimination against a qualified individual with a disability who can perform the essential functions of the job with or without reasonable accommodation.   A disability is defined as a physical or mental impairment that substantially limits a major life activity.  Employees also are protected from discrimination if they are “regarded as” or “have a record” of a disability – even if they are not currently disabled – and if they associate with a disabled person.  Employers should avoid making assumptions about employee health based on appearance, age, or any other criteria. I n addition, under the ADA, employers have an obligation to provide a reasonable accommodation to a disabled employee who can perform the essential functions of the job. This obligation would apply to an employee’s participation in a corporate wellness program.


The Equal Employment Opportunity Commission (“EEOC”) has indicated, with qualifications, that voluntary wellness programs do not violate the ADA. Penalizing employees for not participating, such as through higher insurance premiums, can render a program involuntary, however.


In addition, the ADA limits the use of medical examinations and inquiries in hiring and employment.   Generally, employers are not permitted to make disability-related inquiries or to conduct medical examinations unless job-related and consistent with business necessity. Many wellness initiatives use Health Risk Assessments (“HRAs”) to obtain employee health information. The EEOC has indicated that HRAs are permissible where they are part of a voluntary wellness program - but may be discriminatory if completion is required in order to participate in the program.  However, behavioral questions regarding eating, sleeping, exercise and other habits, may fall outside the scope of ADA restrictions.  Health information obtained from HRAs must be kept confidential.  It remains to be seen whether the recently enacted protections to genetic information including medical histories and other data solicited on HRAs.


Some state or local anti-discrimination laws also prohibit discrimination on the basis of “disability” and/or “handicap,” and may define those conditions more broadly than a “disability” under the ADA.  Weight is an area of focus for many wellness programs.  Obesity, usually where morbid or caused by another medical condition, may be a disability under ADA or state law if it meets the statutory definition, and some local ordinances specifically prohibit discrimination on the basis of weight. 


Corporate wellness programs also could be subject to challenge on the basis of other protected classifications, such as race, national origin, gender and age, if employers screen or penalize employees for conditions more prevalent among those protected groups.  Certain health conditions may be exhibited more frequently in older workers or employees of a particular race or national origin.  Some states also prohibit discrimination on the basis of atypical cellular or blood trait or genetic information, which could also constitute a basis for challenging corporate wellness initiatives such as health screenings.


 Many states, including New York, New Jersey and Colorado, also restrict employers from engaging in “lifestyle discrimination” which can range from discrimination against smokers to discrimination based on any lawful activity off employer premises during working hours. Employers attempting to regulate out-of-work activity may run afoul of these laws.


Employers who use physical characteristics in employment decisions, such as hiring, could be subject to claims for discrimination. Employers should avoid disability-related inquiries; health or physical-related criteria; restrictions on personal activities; and physical or medical testing unless work-related and applied consistently across employees in a job category and not just to members of one protected class.  


 While there are many benefits to improving employee health, reducing the cost of health insurance is a primary consideration. Some employers impose surcharges or higher premiums on employees who do not meet the company wellness thresholds or who refuse to participate in wellness initiatives. But there are other alternatives that can significantly reduce costs without employer involvement in employee health. For example, audits of health plans to determine whether enrolled employees and dependents are eligible – such as confirming current employment, marital, domestic partner or civil union status, and dependant age and relationship – can significantly reduce costs. Higher deductibles and health savings accounts (“HSAs”) can make employees more financially responsible, and thus provide incentives for employees to improve their own health. 


Despite these challenges, more employers are beginning to take aggressive steps to improve the health of their employees, and benefiting from the results. Companies interested in implementing wellness programs should keep the following guidelines in mind:


  -           Maintain safe and healthy work environments.

-           Use a third party to implement corporate wellness programs.

-           Use voluntary programs, such as employer-paid physicals, on-site exercise facilities and personal trainers, wellness reimbursements, smoking cessation and weight-loss programs, health coaches, and healthy food options in the cafeteria/vending machines.

-                     Audit health plan participation.

-           Aggregate data and trends.

-           Maintain confidentiality of individual health information.

-                     Incentivize don’t penalize.

-           Focus on education.

-           Corporate wellness and employment decisions need to be separate.

-           Train employees who implement corporate wellness programs to comply with the law and company policy.


Properly implemented wellness programs that are voluntary; motivate through incentives rather than penalties; use health information in a permissible way; maintain confidentiality of health information; operate at arms length from hiring and employment decisions; and, focus on education and behavior can achieve the goals of a healthier and more productive workforce and lower health insurance costs without subjecting employers to liability.  


For more detailed information on corporate wellness programs, see my recent article from The Practical Lawyer at:




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