by Philip Bruce
Whether you have an established wellness program or are considering implementing a new one, now is a great time to review your wellness plan. Employees who are determined to lose weight for bathing suit season, quit smoking, or otherwise live a healthier lifestyle may be more inclined to take advantage of your wellness programs. But before you give a helping hand to these resolute employees, make sure your wellness programs don’t fall prey to some common legal pitfalls. A wellness program that isn’t up to par could mean a discrimination lawsuit or even tax penalties. 
Background on wellness programs
A wellness program is essentially any program that offers an incentive (for example, a health insurance premium rebate or discount) or penalty (for example, a premium surcharge) to encourage employees to live healthier lifestyles. Such programs can take many forms, but common examples include offering incentives for joining a gym, losing weight, quitting smoking, or participating in health screenings. Properly implemented, wellness programs are designed to benefit employers through increased employee productivity and decreased medical costs.
The law recognizes two types of wellness programs: participation-based programs and health-contingent programs. As the name suggests, participation-based programs reward employees merely for participating, without regard to meeting any conditions. Examples include reimbursing employees for the cost of a gym membership or providing financial rewards for employees who take biometric tests, regardless of the test results.
Health-contingent programs require individuals to satisfy a health-related activity or standard to be eligible. Health-contingent programs are broken up into two subcategories: activity-only programs and outcome-based programs. Activity-only programs, such as a walking program or diet program, require individuals to complete an activity but don’t require individuals to maintain or meet any specific health goals.
Outcome-based programs require individuals to meet or maintain specific health standards. For instance, an outcome-based program could be one that requires an employee to take a biometric screening and then rewards the employee for having a healthy cholesterol level. Another example may be a tobacco-cessation program that requires the employee to actually quit smoking.
Be aware of the law
Although they sound simple, wellness programs—and particularly health-contingent programs—are regulated by an intricate web of laws, including the Affordable Care Act (ACA), the Employee Retirement Income Security Act (ERISA), the Health Insurance Portability and Accountability Act (HIPAA), the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), and state laws.
Highlights of these legal requirements for wellness programs include recent HIPAA regulations and ACA provisions that require health-contingent programs to meet five criteria:
- Employees must be able to qualify at least once a year.
- Any award or penalty is limited to 30 percent (and 50 percent for tobacco cessation) of the total cost (i.e., both the employee’s and employer’s portions) of health insurance premiums.
- The plan must be reasonably designed to promote health.
- The plan must have reasonable alternative standards (or a waiver of standards) for employees who can’t satisfy the health-contingent standards because of medical reasons.
- The plan must give employees notice that there are reasonable alternatives for the program.
Plans that don’t offer reasonable alternatives for disabled individuals also run afoul of the ADA. Further, employers shouldn’t receive any family medical history directly from individual employees because that information is impermissible genetic information in violation of GINA.
Finally, some state law prohibits employers from discriminating against employees who use tobacco. In that case, employers typically incorporate their wellness programs into an ERISA-governed health plan to ensure that ERISA preempts state law.
Bottom line
In short, wellness programs are not “one size fits all.” You need to know what type of wellness program you have or want to implement. You also need to understand that wellness programs aren’t always easy to manage because they often require specific disclosures and mechanisms for collecting employee information. Once a plan is implemented, you need to consistently review it to make sure it’s reasonably tailored to promoting health and to consider reasonable alternatives for individuals who can’t participate for medical reasons.
In the end, if you want to implement a program with as little risk as possible, a participation-based program is likely the way to go. 
Regardless, you want to make sure your wellness programs are legal so your plans will be around long after your employees’ resolutions have faded. That way, they can try again next year!
Phillip Bruce is an attorney with McAfee & Taft, practicing in the firm’s Oklahoma City, Oklahoma, office. He may be contacted at phil.bruce@mcafeetaft.com.