Emerging Voices: Limitations & Legal Implications of Employee Wellness Programs

By Stone, Kristin N. | Labor Law Journal, Spring 2012 | Go to article overview

Emerging Voices: Limitations & Legal Implications of Employee Wellness Programs


Stone, Kristin N., Labor Law Journal


I. Introduction

With the nation's healthcare expenses rising steadily, employers have begun implementing employee wellness programs as a way to reduce the growing cost of employer-provided health insurance, without dropping coverage, and to encourage their employees to lead healthier lifestyles. These programs tend to offer employees lower insurance premiums as a lucrative incentive. The widespread implementation of employee wellness programs has sparked Congress to pass legislation addressing and curtailing these programs and to provide employers with legal guidelines to properly implement them. While these appear to be fail-proof programs with commendable goals, employers must be wary of the potential they have to infringe on privacy rights, discrimination laws, and federal and state laws. With the passing of relevant legislation and increasing popularity regarding wellness programs, employers will likely see a rise in litigation. However, with proper precaution, these creative employee wellness programs can be effective and employers can avoid the potential legal implications.

II. Wellness Programs - Why Now?

Employer-provided health insurance became prominent in the United States during World War II and with Congress' enactment of the Stabilization Act in 1942. 1 The Stabilization Act put a restriction on employers' wage increases, but still allowed for employee insurance plans.2 As a result, employers began offering insurance benefits to draw in more workers. However, the cost of healthcare in the United States has substantially escalated in the last 70 years and employers are seeking creative solutions to reduce their expenditures on employee healthcare. In 2009, total health expenditures in the U.S. reached $2.5 trillion, with an average healthcare expense of $8,086 per person,3 an astronomical increase from 1960, when national health expenditures were at a mere $27.3 billion.4 By 2019, national health expenditures are projected to weigh in at $4.5 trillion.5 The rising cost of healthcare in the United States has captured the attention of Americans and this crisis will continue to be of public concern until a large-scale remedy is found. Until then, employers and employees alike are bearing the burden of rising healthcare costs in the United States.

According to recent data, 65 percent of employers that offered health benefits in 201 1 have turned to employee wellness programs to fight the rising cost of healthcare.6 These programs may include smoking cessation programs, health club discounts, weight loss programs, healthcare education and the like.7 While the cost of healthcare seems to be the primary motive behind any wellness program, they do have significant effects on reducing absenteeism, increase in work productivity, and improved worker morale and loyalty.8 In support of these progressive solutions, the Patient Protection and Affordable Care Act ("PPACA") offers small businesses federal grants to help establish reasonable and encouraging wellness programs in the workplace.9 While the reasonably designed wellness program seems to be a positive and welcomed solution to the rise in healthcare costs, many employers have chosen a more aggressive approach, which poses a threat of litigation.

III. Limitations and Statutory Restrictions

As employee wellness programs have become more aggressive and mandatory, employers face several legal barriers such as the Illinois Insurance Code, the Health Insurance Portability and Accountability Act of 1996 ("HIPPA"), Employee Retirement Income Security Act ("ERISA"), and the Americans with Disabilities Act ("ADA").10

A. Illinois Insurance Code

The Illinois Insurance Code defines a reasonably designed wellness program as one that has a "reasonable chance of improving health or preventing disease; is not overly burdensome; does not discriminate based upon factors of health and is not otherwise contrary to law."11 The Code prohibits an employer from penalizing individuals unable to participate due to an adverse health status. …

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