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The Risks and Rewards of Mandatory Wellness Programs by Goodsill attorney Nicolas Kelsey

Jul 9, 2008

With no end in sight to the precipitous rise in health care costs, businesses are looking for new ways to reduce the price of employee health insurance. Increasingly, companies are considering mandatory wellness programs as a strategy to combat these costs, according to a recent report by law firm Littler Mendelson. Wellness programs typically offer a set of health benefits centered around preventative care, such as health risk assessments, exercise programs, or assistance in quitting smoking.

Wellness programs aim to improve employee health, reduce insurance costs, and reduce loss-in-productivity costs from employee time away from work. Experts estimate that such programs save employers between $1.50 and $3 for every dollar spent.

While voluntary wellness programs have been around for years, more and more companies are considering making programs mandatory. As the label implies, mandatory programs go beyond offering optional benefits. They provide for discipline of employees who refuse to participate. The strictest programs may even punish employees for failing to reach health specifications, such as failing to reach a particular weight, or continuing to smoke.

Employers’ past reluctance to implement mandatory programs has stemmed from the fact that mandatory plans implicate a variety of employment laws. These include limitations on disclosure of medical information and prohibitions on disability and other discrimination. They also include unique state and local laws. For instance, in the handful of states that prohibit employment discrimination based on off-duty conduct (Hawaii is not one of them), a plan forbidding off-duty smoking would likely be unlawful.

One possible wellness tool that federal law will soon limit is genetic testing. On November 21, 2009, the employment provisions of the Genetic Information Nondiscrimination Act (GINA) will take effect. Under GINA, employers may not require employees to undergo genetic testing. Wellness programs will represent one of the limited circumstances in which GINA allows employers to request genetic information. To do so, the employer must obtain written authorization from the employee. Additionally, access to individually identifiable information must be limited to the employee and the health care professional involved in the testing.

GINA demonstrates that lawmakers are beginning to recognize the necessity of wellness programs, but it also demonstrates that complying with the laws in this area is difficult. The number and complexity of the laws involved means that employers must be careful in disciplining an employee based on a wellness program. In general, requiring employees to meet specific health criteria is more risky than merely requiring participation. Also, a program should offer alternatives to employees who are unable to comply because of traits that are beyond their control. If the program involves the handling of medical information, the employer should consider hiring a third party to handle this information and keep it screened from the employer. Employers must be careful, but they should not be discouraged. Mandatory wellness programs require a significant investment which must take into account legal costs. This investment is likely to pay off, however, in the form of lower insurance premiums and healthier, more productive employees.

Published in the Honolulu Advertiser, July 8, 2008 SHRM Hawaii Special Insert.

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