The modern workplace continues to evolve and change. One factor greatly influencing workplace dynamics as well as employee benefits needs is the multigenerational composition of the workforce. Studies regarding employee benefits trends show that millennials (a generation that began in the early 1980s), who have entered the workforce, desire a wide array of employee benefits—even more so than Generation X-ers or baby boomers. For millennials who came of age in the time of the “helicopter parents”, the desire for employer support and protection with regard to retirement, health, and welfare security has increased. As compared to the independent-minded Generation X-ers, millenials are less opposed to employers being involved in their health and they prefer a paternalistic approach with regard to employee benefits. Baby boomers are focused on having less time to financially recover from the recession before they retire and may plan to work past age 65 or even on a part-time basis when they retire. Employers seeking to capture the loyalty of their diverse employees must take note of the different expectations of their multigenerational workers, as well as the impact that they will have on the attractiveness of an employee benefits program.
As employers continue to navigate the requirements of the Affordable Care Act, one type of employee benefit program that has gained increased interest by employers and employees is the wellness program which can help save health plan costs, promote healthly lifestyles and workplace environments, and reduce absenteeism. Recent studies also show that millenials are particularly health conscious, interested in monitoring their personal health data, healthy workplace cultures, as well as increasing savings for health care costs in vehicles such as health savings accounts. Yet, wellness programs are complex and must be analyzed not only under the Affordable Care Act and HIPAA nondiscrimination rules, but also under such laws as the Americans with Disabilities Act (“ADA”), Genetic Information Non-Discrimination Act (“GINA”), Title VII of the Civil Rights Act, the Age Discrimination in Employment Act (“ADEA”), HIPAA privacy rules, applicable state laws, the Code, and ERISA.
Participatory wellness programs do not include conditions for obtaining rewards that are based on an individual attaining a standard based on a health factor, and they are not required to meet the more elaborate requirements of health-contingent wellness programs. Participatory wellness programs include programs that:
• reimburse costs for gym memberships;
• offer diagnostic testing, such as those that provide a reward for taking a series of biometric tests without regard to the results;
• reimburse employees for costs of participating (or provide a reward) for participating in a smoking cessation program without regard to whether the employee quits smoking;
• provide a reward to employees for attending health education seminars; and
• provide a reward to employees who complete a health risk assessment regarding current health status without any further action required by the employee.
Any rewards provided in connection with a participatory wellness program do not count toward the current 30 and 50 percent permissible reward thresholds of health-contingent programs. Further, reasonable alternative standards do not need to be made available under participatory wellness programs.
Health-contingent wellness programs (including “activity-only” or “outcome-based” programs) must meet several requirements in order to not discriminate based on health status:
• frequency of opportunity to qualify—employees must be able to qualify for the reward at least once per year;
• size of reward—rewards may have a value for all health contingent programs up to 30 percent of the total cost of the annual premium for employee-only coverage (or up to 50 percent for programs to prevent or reduce tobacco use);
• reasonable design—a reasonable standard must be imposed to promote health or prevent disease that is not overly burdensome or a subterfuge for discrimination based on a health factor or highly suspect in method chosen to promote health or prevent disease;
• uniform availability for all similarly situated individuals and reasonable alternative standards—if it is unreasonably difficult due to a medical condition to meet the standard of the program or to attempt to satisfy it, an alternative must be provided or the participation in the program must be waived to obtain the reward; and
• notice of availability of reasonable alternative standards—disclosures must be provided in all plan materials describing the program regarding the availability of alternative standards to qualify for the reward and, if applicable, the possibility of a waiver of the otherwise applicable standard.
In addition to the foregoing, wellness programs must be analyzed under many laws. Under the ADA, employers cannot discriminate against disabled employers in connection with the terms, conditions, or privileges of employment, or make disability-related inquiries or require medical exams of employees (unless job-related and consistent with business necessity). Under limited EEOC guidance, such inquiries may be permissible under a wellness program if the program is voluntary and employees are neither required to participate nor penalized for non-participation. To date, the EEOC has not published bright-line rules but, instead has brought litigation against companies as a result of their wellness program practices. In these cases, the EEOC has raised issues where programs impose large penalties (such as full cost of insurance, cancellation of insurance or even termination of employment) on employees for refusing to participate in medical examinations, biometric testing or health risk assessments (HRA) or make inquiries that violate GINA. GINA requires that an HRA must state that any incentive will be given for completing the HRA regardless of whether the employee answers the questions seeking genetic information. The outcome of these cases, and potentially others, is not yet clear but must be monitored.
A wellness program could also potentially violate Title VII if it results in disparate treatment or has a disparate impact on a protected class. The program could also violate the ADEA, for example, if it can be shown that the wellness program provides financial incentives based upon health standards that are more difficult for older workers to achieve.
State laws can also be implicated, including state laws on confidentiality of information, anti-discrimination and lifestyle (sometimes referred to “off-duty conduct”) laws. Any information obtained in conjunction with wellness programs should also be protected under applicable federal laws regarding confidentiality, privacy, storage, and use. Service providers should be prudently selected and monitored, and any service agreements entered into should include provisions (as well as any applicable Business Associate agreement) to protect any personal information and data collected in conjunction with the program in accordance with HIPAA and other confidentiality and data privacy laws. Employers must also determine whether the wellness program is part of their overall group health plan or, rather, whether such program constitutes a stand-alone arrangement that is subject to ERISA. Employers must also consider whether the type of reward must be taxed as income (e.g., gift cards).
While wellness programs may be desirable and can serve to promote a wellness culture at work, care should be taken to ensure that the program is designed to comply with all applicable laws. Importantly, thought should also be given to the composition of the workforce, potential for adverse impacts against different multigenerational members, and whether the program would be welcomed or perceived as a violation of rights.
"Studies regarding employee benefits trends show that millennials (a generation that began in the early 1980s), who have entered the workforce, desire a wide array of employee benefits—even more so than Generation X-ers or baby boomers.”