Understanding employee wellness programmes in the US

December 2017 | FEATURE | LABOUR & EMPLOYMENT

Financier Worldwide Magazine

December 2017 Issue

The workplace of today is very different to that of just five years ago. Employee demographics are changing, as are working patterns. Issues such as working from home and work/life balance are becoming increasingly important. As more millennials enter the workforce – a report from WebMD suggests that millennials represent the largest generation in the current workforce – priorities are shifting.

Millennials are far more concerned about the future than their older colleagues. According WebMD, 45 percent of millennials consider financial health, such as bills, debt and savings to be among the biggest issues they will face during their working lives. As a result, companies are under increasing pressure to institute employee wellness schemes, to help employees cope with existing working pressures and to prepare for later life. They also offer employees an effective support network, one of the most valuable benefits an organisation can offer.

The corporate wellness industry has grown considerably in recent years. In 2016, in the US, the industry generated revenue of $7.8bn, with annual growth of 4.8 percent between 2011 and 2016, according to IbisWorld. The sector is expected to see annual growth of 7.8 percent between 2016 and 2021.

While wellness schemes benefit employees, they also have a lot to offer employers. Wellness programmes create a healthy and productive workforce, and though they can often be expensive, they represent a good opportunity to drive ROI, as they boost employee participation. Furthermore, robust wellness programmes can help drive down health plan costs.

According to the US Department of Labour (DOL), wellness programmes offer ROI of around three to one. At their most simplistic, these schemes come in two forms: participatory and health-contingent. A participatory scheme will either offer no reward or incentive for an employee’s participation or it will offer a reward or incentive for an employee’s voluntary participation in a programme that is not tied to the employee’s health. A health-contingent programme offers a reward or incentive when the participant satisfies a given standard related to a health factor. However, health-contingent plans, due to the rewards they offer, are often linked to an employee’s health insurance scheme, which can create issues for employers as there are a number of laws governing wellness schemes, depending on whether the plan is health-contingent or participatory.

Accordingly, employee wellness programmes are subject to a variety of complex and often ambiguous federal rules and regulations that make their administration a challenge for even the most astute employer. By contrast, they put inattentive employers who sponsor such programmes at risk of liability. Any employer considering adopting a wellness programme needs to take the necessary steps to ensure that the programme complies with a raft of legislation (such as the Health Insurance Portability and Accountability Act of 1996 (HIPPA)) before implementation. Issues such as ‘group health plans’, which stipulate that employees achieve particular health statuses, are significantly impacted by legislation.

The introduction of the Preserving Employee Wellness Programs Act, for example, has created issues for companies. Wellness incentives have recently been the subject of US Equal Employment Opportunity Commission enforcement actions and guidance. A bill was introduced in the House of Representatives to expand the scope of wellness incentives employers may offer workers without violating the Americans with Disabilities Act or the Genetic Information Non-Discrimination Act.

There are also serious tax consequences for organisations that offer incentives to employees in a health-contingent plan. These tax implications extend to the employees themselves, who have received, for example, a gift card, which would count as taxable income. There are also repercussions for organisations collecting medical history and family medical background information under a health-contingent scheme, as this data collection falls under the Genetic Information Nondiscrimination Act of 2008. Companies must be mindful of the regulatory consequences of their wellness programmes and their data collection practices when arranging and managing schemes.

Two recent lawsuits have highlighted the regulatory complexity: AARP v. EEOC and Acosta v. Macy’s. Employers that sponsor wellness programmes (or are thinking about implementing one and) wellness programme administrators should take note of these cases and their potential implications. In AARP, a federal court threw out a rule allowing employers to call their workplace wellness programmes “voluntary” when employees stand to lose thousands of dollars for not participating. The court held that the Equal Employment Opportunity Commission’s regulation authorising the use of significant financial incentives for participation in workplace wellness programmes was arbitrary and capricious.

In Acosta, the DOL claimed that Macy’s and two of its third-party affiliates violated Employee Retirement Income Security Act of 1974 (ERISA) fiduciary rules and related offences with respect to the payment of out-of-network healthcare claims, as well as against Macy’s for alleged violations of HIPAA’s wellness rules and ERISA’s fiduciary rules. This marks one of the first times that the DOL has publicly attempted to enforce the HIPAA wellness rules and may signal a change in the DOL’s enforcement actions moving forward.

Achieving a programme which is beneficial for employers and employees will require patience and understanding. There is no right or wrong way to implement a corporate wellness programme; each scheme should be bespoke. By offering employees the support they need through a compliant programme, companies and their employees both stand to benefit.

Richard Summerfield