Employer-sponsored health and wellness programs have been studied with increasing rigor during the past several decades, and it is now generally accepted that such programs generate an excellent return on investment. For example, a review of studies (2) showed that for every dollar spent on well-designed employee health and wellness programs, there is an average savings of $4.30 on both health care costs and absenteeism. Furthermore, reduced on-the-job productivity because of health-related factors (presenteeism) tends to accrue higher expenses than direct medical care costs for many chronic conditions (6). It is evident that chronic disease (e.g., cardiovascular disease, obesity, cancer, and diabetes) and risk factors (e.g., smoking, inactivity, and poor nutrition) significantly contribute to medical and productivity costs (3,8,11). In 2003, cardiovascular disease and stroke cost $351.8 billion in medical and productivity costs, and in 2000, physical inactivity cost 76 billion in medical costs (12). These costs, which continue to escalate, are not only eroding corporate profits, but impacting the economy as well.
EMPLOYER RESPONSE TO ADDRESS THE COST BURDEN
To address these escalating costs, employers are taking action by implementing programs designed to improve the health status of the employees. As a result of recognizing the relationship between poor employee health and excess health-related medical and productivity costs, employers have responded with a two-tiered strategy: health promotion programs to improve the health of the population and disease management programs to support those with chronic conditions (4,9). However, employers who decide to implement these types of programs also face a variety of legal issues and concerns. The programs must comply with U.S. federal and state laws.
THE LEGAL CONTEXT
As part of the programmatic solutions, various incentive programs are often offered in employer-sponsored wellness programs to entice employees to participate in programs that may lead to improved employee health and containment of medical and productivity costs. Most notably, the Health Insurance Portability and Accountability Act (HIPAA), the American with Disabilities Act, state lifestyle discrimination laws, and tax laws affect the employer-sponsored health promotion program. More specifically, employers who want to link certain incentives (e.g., premium discounts, rebates, lower deductibles, and copays) with their health care plan may need to follow the HIPAA Final Nondiscrimination Rules (1) - a federal law that became effective on February 12, 2007. Such incentives may be based on meeting criteria related to an observable behavior (e.g., participation or completion of a behavior change program) or, alternatively, on the achievement of a predetermined standard related to health (e.g., cholesterol level below 200, body mass index under 25, etc). The purpose of this article is to describe how worksite health promotion professionals can apply this law to standard-based employee wellness programs, that is, those that require an employee to meet a certain health factor to be eligible for a reward (an incentive) associated with the health plan.
THE FIVE REQUIREMENTS OF HIPAA
The HIPAA law identifies five specific requirements that health promotion programs need to comply with to follow the nondiscrimination rules. These five requirements only apply to standard-based programs, and they are outlined in Figure 1. Employee wellness programs that are not standard-based, for example, those that provide rewards for participation do not need to comply with the five requirements. These include programs such as:
- A program that reimburses all or part of the cost for memberships in a fitness center.
- A diagnostic testing program that provides a reward for participation and does not base any part of the reward on outcomes.
- A program that encourages preventive care through the waiver of the copayment or deductible requirement under a group health plan for the costs of, for example, prenatal care or well-baby visits.
- A program that reimburses employees for the costs of smoking cessation programs without regard to whether the employee quits smoking.
- A program that provides a reward to employees for attending a monthly health education seminar (1, p 75,052).
For standard-based programs, "a reward can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as deductibles, copayments, or coinsurance), the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan" (1, p. 75,044). This law was formed so that these types of rewards would not be used to discriminate against (punish) employees who had known health risks, medical conditions, and/or genetic predispositions to certain medical conditions. In other words, the law prohibits a health plan or issuer (e.g., an employer) from charging similarly situated individuals different premiums or contributions, deductibles, or copayments based on a health factor unless the five requirements are met. To comply with this requirement, the "program must allow a reasonable alternative standard (or waiver of initial standard) for obtaining the reward to any individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to satisfy the initial standard" (5, p. 53). A reasonable alternative could include that the employee "comply with his or her doctor's recommendation," which "could be administered or monitored by a disease management company, automated screening kiosks, self-report, or submission of a note from the doctor regarding completion" (5, p 54). Specific program examples of how to apply the five requirements are presented in Figure 2.
When administering or monitoring an employee's attainment of or adherence to any specified health factor and/or reasonable alternative, certain issues may arise that need to be addressed when designing standard-based programs. For example, relying on employees being honest on self-reports could create some problems. In 2008, Whirlpool Corporation at an Indiana plant suspended 39 employees who were seen smoking in designated areas outside the plant but who had declared themselves eligible for a $500 annual tobacco-free insurance discount as part of the annual benefits enrollment process (10). Nonsmokers at Whirlpool have been eligible for this reward since 1996. For incentives like this, it is not only important for employees to understand the consequences of falsifying company documents, which could include suspension and termination, but it also may be necessary to consider opposition to such penalties (e.g., smokers paying a surcharge on premiums) from unions. Several years ago, Local 808 representing employees at Whirlpool filed a grievance about the smoker penalty and won arbitration (10). Although Whirlpool tried to get this ruling set aside, the dispute resulted in an undisclosed legal settlement (10).
Another issue that needs to be considered is the potential added costs of involving a disease management company and/or an employee's physician to administer or monitor an employee's health factor or behavior that satisfies a reasonable alternative. For example, regarding a reasonable alternative, "it is permissible for the health plan [or issuer] to require the enrollee [the employee] to pay a reasonable amount to satisfy the alternative," although "there is no set rule as to what is a reasonable amount" (8, p 54). Therefore, it is wise to take into account the value of the reward (the incentive) with respect to any added administrative or monitoring costs.
In addition, the validity and reliability of the tests used to determine certain specified health factors need to be considered. For example, certain tests, (e.g., skinfold measurements to estimate percent body fat or cardiovascular assessments to estimate cardiovascular endurance) may not generate accurate results because of the inherent error or limitations associated with these tests and/or the skill level of the person who administers the tests. Therefore, the tests used to measure specified health factors should be carefully considered. Procedures for monitoring specified reasonable alternatives also should be well established so that they can be as accurate and reliable as possible.
RECOMMENDATIONS AND CONCLUSIONS
It recommended that employers who want to offer standard-based programs consult with their legal counsel to consider the many variables involved when establishing these programs. It also is important to reiterate that adherence to the HIPAA nondiscrimination rules does not mean adherence to the HIPAA privacy and security rules, the American with Disabilities Act, state lifestyle discrimination laws, and state privacy laws, per se. These laws have additional requirements for employer-sponsored wellness programs, which are described in other sources (5,7).
This column provides general legal information and is not intended to substitute for individualized legal advice.
1. 71 Fed. Reg. 75,013 (December 13, 2006). (26 C.F.R pt 54, 29 C.F.R. pt. 2590, 45 C.F.R. pt. 146). Nondiscrimination and Wellness Programs in Health Coverage in the Group Market; Final Rules. Available from: http://www.dol.gov/ebsa/Regs/fedreg/final/2006009557.pdf
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