Corporate Wellness Programs: Are They a Wise Investment for Employers?

Jeremy Sharp is a partner with the law firm Walter & Haverfield in Cleveland.
Jeremy Sharp is a partner with the law firm Walter & Haverfield in Cleveland.

By Jeremy Sharp

The new political climate in Washington, D.C., has increased the uncertainty regarding how health care in the United States will evolve in the coming years.

One facet of health care, however, is subject to little uncertainty, regardless of the ultimate fate of health care reform: employer-sponsored wellness programs. Such programs will remain one of the best tools available to employers seeking to reduce overall health care costs.

Industry experts provide varying answers when asked return on investment an employer can expect to realize for dollars spent on wellness programs. The consensus seems to be that in the long-term, an expected return of $2 to $6 for each $1 spent on wellness is reasonable. Even better, it’s likely that the return will increase over time, as many wellness costs are relatively front loaded.

If wellness programs were stocks, most people would add them to their investment portfolios immediately. That being the case, why aren’t employer-sponsored wellness programs both ubiquitous and comprehensive?

One reason is that wellness requires an investment by the employer and faith that the investment will pay off over time. Another reason is that wellness programs must comply with a variety of laws, including the Americans with Disabilities Act (ADA), Genetic Information Nondiscrimination Act (GINA) and Healthcare Insurance Portability and Accountability Act (HIPAA) – not to mention the 2010 health care reform law.

The EEOC recently released final regulations under GINA that were necessary to provide certainty among employers regarding a number of wellness-related issues (although it is important to note that the regulations did not answer all potential questions). Now that the legal landscape has been clarified somewhat, employers who do not yet offer wellness programs would be wise to consider implementing them, and employers with existing programs should evaluate them to ensure compliance with the recent regulations and to analyze how they might improve their return on investment.

GINA Compliance for wellness programs under final regulations

In the final regulations under GINA issued in November 2010, the Equal Employment Opportunity Commission (EEOC) clarified the application of GINA to wellness programs and health risk assessments, settling questions that might have discouraged some employers from implementing wellness programs or utilizing them more fully.

Wellness programs that use health risk assessments are permitted to acquire genetic information, including family medical history, only if three requirements are satisfied:

  • The genetic information is disclosed voluntarily (that is, the employer cannot require the provision of genetic information nor penalize employees who do not provide it).
  • The employee provides prior knowing, voluntary and written authorization for the disclosure of genetic information (including the types of genetic information to be obtained, the general purposes for which such information will be used, and restrictions regarding disclosure of that information).
  • Individually identifiable genetic information is provided only to the individual, the individual’s family, and the licensed health care professionals or board-certified genetic counselors who will provide genetic services.

The final regulations under GINA also clarify that employers may offer financial incentives for completing a health risk assessment, but only if questions regarding genetic information are voluntary and identified to employees. Additionally, answering such questions is not required in order to receive the financial incentive.

Employers also may offer financial incentives for participation in disease management programs (or other programs that promote healthy lifestyles) where the genetic information disclosed indicates that an employee is at increased risk for developing a particular health condition in the future (and such participation-based incentives are also offered to employees who already have been diagnosed with such condition).

One important clarification provided by the final regulations is that employers may offer wellness programs containing financial incentives for individuals who achieve certain health outcomes, such as lowering blood pressure, glucose or cholesterol levels, or losing weight.

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It also is important to note that employer-sponsored wellness programs must comply with the ADA and HIPAA. For example, they must make reasonable accommodations for employees with disabilities, providing reasonable alternative standards where health conditions preclude participation in initial standard.

ADA compliance for wellness programs

The ADA prohibits employment-based discrimination against employees with disabilities. As a result, employers are limited in what they may ask an employee about his/her medical conditions. Any such inquiry, to the extent permitted, must be job related and consistent with business necessity. Further, the ADA permits employers to conduct medical examinations and obtain medical histories so long as they are “voluntary.”

The EEOC has generally taken the position that voluntary wellness programs must comply with ADA (with some exceptions). One important consideration is that an employer must furnish a reasonable accommodation for employees unable to participate in any aspect of the wellness program due to a disability.

HIPAA compliance for wellness programs

HIPAA permits wellness programs with limited individual incentives either for participation or for achievement of certain health outcomes. The U.S. Department of Labor (DOL) has suggested a limit of 10-20 percent of the total cost for employee-only coverage; although, it is worth noting that the 2010 health care reform law would increase this percentage to 30 percent in 2014.

HIPAA requires wellness programs to be reasonably designed so that they promote good health and disease prevention, permit individuals to qualify for any incentive at least once per year and make incentives available to all similarly situated individuals. They must provide reasonable alternative standards or waivers available for those with health factors precluding participation in the initial standard, and proper disclosure of the same.

It is important to note that HIPAA forbids employers from utilizing eight established health factors in determining eligibility or premiums:

  • Health status;
  • Medical condition;
  • Claims experience;
  • Receipts of health care;
  • Medical history;
  • Evidence of insurance;
  • Disability; and,
  • Genetic information.

A wise investment

The future of employer-sponsored health care remains uncertain, and is not likely to be fully settled for several years. For the present, the only certainty is that health care costs are a volatile line item on every corporate balance sheet.

With this in mind, the most proactive step that employers can undertake to address that volatility is an increased investment in wellness programs. Recent clarifications in the law, coupled with ever-spiraling health care costs and uncertainty regarding health care reform, make wellness a wise investment for 2011.

Jeremy Sharp, a partner at Walter & Haverfield in Cleveland, concentrates his practice primarily in the field of employee benefits and executive compensation. He also has experience handling related legal issues involving taxation, labor and employment law, school law and health care reform. You can contact him at


5 Comments on “Corporate Wellness Programs: Are They a Wise Investment for Employers?

  1. Great post with comprehensive information. You are absolutely right that the tough thing for many employers is the commitment to be in it for the long haul before seeing the true ROI benefit. They also need to take the program beyond the work walls and into the community and homes if they want to succeed in changing behaviors. Community volunteer programs should become a part of the corporate wellness programs. It’s also a great way for smaller employers to pool their resources.

    As an additional benefit, they have a healthier community, which means a healthier pool of potential employees, and better employee engagement and satisfaction.

  2. I agree that corporate wellness programs are a good thing but how do we get employees to embrace and commit to them so there will actually be an ROI from the program?

  3. The ROI for employee wellness programs has already been shown in the research. After all these years, we now KNOW that if implemented properly, workplace wellness does work! Getting employers on board with this is often another story however, as it does take a major commitment from the top and a significant investment of time, money, and other resources to build a really good comprehensive program. Companies can start by hiring dedicated staff who are actually trained and/or experienced wellness professionals. Too often organizations assign employees in other areas to develop and coordinate their wellness programs and activities, or they hire inexperienced staff without the proper professional training and preparation, and then they wonder why their program is not very inspiring or successful for long. But like any career field, a good wellness program needs to be implemented by the right person and just because someone has a background in HR or in sports and athletics, for example, this does not necessarily make them a good choice for a wellness program coordinator. If a company hires the right person, I can almost guarantee that they will create and lead a successful wellness program, but right off the bat, this will be an intial investment as we get what we pay for and to bring someone in with the goods, it will take a little more than an entry level salary as well.
    Another thing to keep in mind, is to be careful not to have a “wellness extremist” leading your program either. As impressive as this person may be with their own personal fitness and wellness levels and achievements, this is also a sure turn off for the majority of an organization’s employees. A good wellness program needs a leader who definitely is a wellness role model, but at the same time, is also encouraging, supportive, empathetic, and understanding, and who is not a wellness dictator or fanatic in any way. Moderation and balance are key!

  4. Employee Health Risk Assessments are a scam! The blood draws are performed by hacks who work for these HRA companies because they can’t get a job with hospitals or clinics. Bring your bandaids if they are coming for you! A guy in my company got a completely favorable HRA result in May and wound up with quadruple bypass surgery in July! The screening is useless; won’t detect a problem as severe as this! The cost of these assessments fill the pockets of the insurance companies.

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