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Wellness Programs

January 24, 2012

An unhealthy workforce impacts an employer's bottom line.  Employers with unhealthy employees spend more in health care costs and expenses associated with unproductive and absent employees.  In an effort to curtail the costs associated with an unhealthy workforce, many employers are implementing wellness programs.  Studies show that employers who have a successful wellness program have a healthier and happier workforce resulting in an improved bottom line.

Wellness programs are broadly defined to include any program that promotes health or prevents disease.  Wellness programs come in many forms.  In their simplest form, wellness programs provide an incentive to employees who simply participate in the wellness activity.  For example, a wellness program may offer a prize, such as a pedometer or water bottle, or cash to employees who simply engage in healthy behaviors, such as walking.  More complex wellness programs may provide an incentive only to employees who satisfy certain health criteria, such as quitting smoking, losing weight, or lowering cholesterol.  Some wellness programs tie the incentive to the employer's group health plan, providing a lower employee premium contribution to those employees who participate in the wellness program activities or those who satisfy the required health criteria.

Although there is a great deal of flexibility in designing a wellness program, various laws restrict certain activities and need to be considered before implementing a wellness program.  For example, many employers require employees to complete a questionnaire about general health and lifestyle, intended to identify individuals who may benefit from the wellness program and identify areas of concern.  These are known as "health risk assessments."  While health risk assessments are a popular and beneficial tool under wellness programs, an employer is limited in its ability to offer a financial incentive in exchange for the employee's participation in the program and/or responding to certain types of health related questions under the Genetic Information Nondiscrimination Act and the Americans With Disabilities Act. 

In addition, regulations under the Health Insurance Portability and Accountability Act (HIPAA) regulate wellness programs that are tied to group health plans and that offer rewards based on the employee satisfying certain health criteria (for example, a lower health plan premium if the employee achieves a cholesterol count of under 200).  Incentives under these programs may not exceed 20% of the cost of the health plan coverage and must meet other requirements. 

The Patient Protection and Affordable Care Act provides additional incentives for employers to adopt wellness programs.  This Act increases the limit that applies to wellness programs regulated by HIPAA to 30% of premiums in 2014.  In addition, the Act provides a grant to certain small employers who did not provide a wellness program prior to March 23, 2010.

A successful wellness program is a worthwhile investment in controlling future costs.  Careful consideration should be given to available options and properly structuring the program.  Remember, a healthy and happy workforce will improve your bottom line.

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