Workforce Wellness and Engagement
The Patient Protection and Affordable Care Act is placing new emphasis on the value of wellness for both employees and employers. The Robert Wood Johnson Foundation has awarded EANJ a grant to develop a comprehensive online resource for employers who want to implement workforce wellness and engagement programs.
The Small Employer’s Challenge
Is a Wellness Program necessary for a small employer?
What are the most typical Wellness Programs?
What is the Return on Investment (ROI) of a Wellness Program?
In addition to tangible ROI, what are the other benefits of Wellness Programs?
Are there legal compliance issues in administering a Wellness Program?
Does the Employee Retirement Income Security Act (ERISA) apply to Wellness Programs?
Does COBRA apply to a Wellness Program?
Would the Genetic Information Nondiscrimination Act (GINA) apply to a Wellness Program?
Would the Americans with Disabilities Act (ADA) apply to Wellness Programs?
What is the first step to establishing a Wellness Program?
What kind of Wellness Program is best?
The Small Employer’s Challenge
Eight out of ten New Jerseyeans work for a small employer, with about 1,400,000 employed by an employer with 50 employees or less. As in most states, the smaller the employer, the higher the health care premium. For example, in 2010, an employer with 20-50 employees paid about $8,800 per employee per year for health care. In contrast, an employer with 100 or more employees paid about $7,500.
In 2010 EANJ convened ten meetings with employers in five regions of the state. As among the top issues expressed by the 458 private sector employers that participated were 1) increased health care costs (78%); 2) maintaining the productivity of the existing workforce (62%); 3) the mismatch of skills of current and future workers (39%); and 4) finding the money to make capital investments (32%).
The issues above are interrelated and all employers face them. But as noted, while various workplace wellness programs are now commonplace, they are supported primarily by larger employers. The state’s smaller employers, for whom most New Jersey residents work, are left to fend for themselves. Worse, there are substantial obstacles for small employers to invest in disease prevention and employee wellness, even though the literature indicates that such programs would raise productivity and lower health care costs over time.
This Website provides information and resources to employers, particularly smaller employers with 50 or less employees, so that they can successfully engage their employees in Wellness Programs.
What is a Wellness Program?
Generally speaking, a wellness program promotes health awareness and healthy lifestyles as a means to contain the increasing cost of health insurance and to engage employees to reach higher levels of productivity. The goal of a Wellness Program is to improve the health and wellbeing of employees (and their families).
Is a Wellness Program necessary for a small employer?
Gallup estimates that 450 million days of work a year are missed because of health problems, resulting in an estimated cost of $153 billion in lost productivity. Statistically, even if there are only 50 employees within a company:
• 30 sit all day to do their work,
• 25 experience moderate to severe stress,
• 17 are overweigh by 20% or more,
• 12 smoke,
• 12 suffer from some form of cardiovascular or other disease,
• 25 have high cholesterol (over 200 mg/dl),
• 8 take a prescription drug for depression, anxiety or other mental disorder,
• 5 are heavy drinkers,
• 5 have high blood pressure,
• 3 are diagnosed with diabetes,
• 5 use marijuana, and
• 1 uses cocaine.
At least 25 percent of health care costs incurred by working adults are directly attributable to health risks that can be modified (e.g., diet, exercise, tobacco use, moderate alcohol consumption, etc.). Moreover, the lost productivity due to absenteeism would substantially increase if the costs of “presenteeism” were also included. “Presenteeism” is when employees report to work but are less productive in their jobs because of poor health or wellbeing.
What are the most typical Wellness Programs?
Effective Wellness Programs can be as simple as bringing baskets of fresh fruit into break rooms to encourage better eating. They can be as extensive as building fitness facilities onsite or paying for obesity treatments. For a smaller employer, a typical Wellness Program includes any combination of the following:
• Health Risk Assessment (HRA),
• Smoking cessation class;
• Subsidized gymnasium membership,
• Heath fair,
• Healthy diet class,
• Yoga and stress reduction class,
• Subsidizing healthy options in vending machine, e.g.: For instance, $1 for a cookies but only 25 cents for an apple,
• Walking club before or after work,
• Pedometer challenge with a goal of 10,000 steps a day,
• Providing a secure and convenient place to store bikes at work,
• “Lunch and learns”;
• Encouraging employees to take the stairs, and
• Healthy food choices for meetings.
What is the Return on Investment (ROI) of a Wellness Program?
Demonstrating a financial return for a Wellness Program is a challenge. While the ROI for a Wellness Program seems intuitive, many organizations have measured positive tangible results. A survey reported by Buck Consultants, LLC analyzed the effectiveness of workplace wellness strategies at 555 firms representing 7 million employees. About half of employers – 49 percent – reported health care cost reductions of 2 to 5 percent per year.
It’s more difficult for smaller employers to measure ROI because they are not allowed to negotiate premiums with health insurance companies in the highly-regulated small group market (2-50 employees). In a 2010 survey of small employers that have implemented a Wellness Program, 70% stated that the ROI was either unknown or had not been calculated. However, according to the Cornell University Institute for Health and Productivity Studies, a company investment of $100 to $150 per employee each year can save employers $300 to $450 for each employee per year. On the high-end, the Wellness Councils of America reported a $24 return on every one dollar spent on a company wellness program for small business. In a 2005 survey by The Art of Health Promotion, employers that instituted employee health and wellness programs realized a 30% reduction in absentee costs.
ROI is a common financial measure and is typically expressed as a ratio of savings to spending. The impact of Wellness Programs is usually measured by determining the ratio of medical expenses not incurred and productivity to the total costs of wellness. Smaller employers find it difficult to estimate ROI in dollars and cents. First, they cannot get any meaningful data from the insurance company. Second, many small businesses, particularly in the service industries, have no reliable measure of employee productivity.
An employer can estimate the ROI of a Wellness Program by using WellStep’s ROI Calculator.
In addition to tangible ROI, what are the other benefits of Wellness Programs?
There is a high correlation between employee wellbeing and engagement at work. Unfortunately, according a Towers Perrin report, just 2 in 10 employees are fully engaged in their work, willing to go the extra mile to help their companies succeed. More troubling, 38 percent of employees are partly or fully disengaged at work. Disengaged employees produce on average of 50 percent less revenue than an engaged employee.
The majority of employees – 62 percent – feel that their work lives affect their physical and mental health and is well established that a healthy workplace increases job satisfaction and productivity. In addition to promoting healthy lifestyles, a Wellness Program can increate morale, teamwork and trust at work.
Are there legal compliance issues in administering a Wellness Program?
Depending on the sophistication of the Wellness Program, compliance issues may arise under various federal laws. But for a small employer with limited time and resources, the simplest Wellness Program would include any combination of the following voluntary activities: a basic HRA, monthly seminars, access to fitness centers, weight loss classes and smoking cessation programs that are uniformly accessible and voluntary.
A wellness program is voluntary if it does not require employee participation and does not penalize employees for not participating.
Wellness activities can be paid for by the employer or the employer can incentivize participation with gift certificates, tickets or modest cash rewards. But note that gifts and cash awards provided to an employee by an employer many constitute taxable income.
Wellness activities can also be incorporated into Supervisory Training or other management strategies that seek to create healthy workplaces. For information about Supervisory Training, click here.
The more sophisticated the Wellness Program, particularly when the program offers “medical benefits” the more time and effort must be spend on meeting legal compliance standards.
Does the Employee Retirement Income Security Act (ERISA) apply to Wellness Programs?
ERISA is a federal law. Among other things, ERISA governs employee welfare benefit plans, which includes any plan, fund or program established or maintained by an employer for the purpose of providing participants or their beneficiaries “medical benefits.” As noted above, Wellness Programs range widely in their design and sophistication. For example, a basic Health Risk Assessment (HRA) provides a questionnaire that employees complete to determine whether they are at risk for certain diseases. Employees answer the questionnaire, which includes questions about exercise, eating and smoking habits, and about current health. A report is generated for each participant with recommendations to follow up with their personal health care provider, if necessary. Educational materials are also provided. The U.S. Department of Labor has determined that this basic HRA does not provide medical benefits. Similarly, a health promotion campaign, “lunch and learns” or making exercise facilities available are not medical benefits.
In contrast, a Wellness Program could also provide diagnostic or preventive services, such as laboratory tests, biometric screening and health coaching for certain identifiable health risks. This may constitute “medical benefits.” As such, the Wellness Program may require a separate plan document, summary plan description and potentially a Form 5500 filing.
For a small employer that does not have the time or the resources, its best to promote healthy lifestyles in a way that does not require compliance with ERISA. Simple health promotions, guest speakers, on-site seminars, exercise and weight loss classes, contests, making a website available, and voluntary employee participation in a smoking cessation or stress reduction class are not subject to ERISA. On the other hand, such passive programs achieve modest results at best.
For employers that want to achieve more tangible ROI results, a more sophisticated and robust Wellness Program may be warranted. For example, employers may want to create incentives related to a health factor or follow up with preventive health services. If so, it is best to incorporate the Wellness Program into an existing health care plan, which is already subject to ERISA (e.g. fully insured health care plan purchased from an insurance company). Alternatively, a separate ERISA plan could be established.
Does COBRA apply to a Wellness Program?
To the extent that a Wellness program provides medical services, ERISA would apply and therefore the plan would be subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA). Thus, a COBRA beneficiary should be offered the opportunity – at his or her own cost – to continue participation in the Wellness Program.
How do the Health Insurance Portability and Accountability Act (HIPAA) nondiscrimination rules apply to Wellness Programs?
HIPAA’s nondiscrimination rules apply to health plans and generally prohibit discrimination in eligibility, premiums and benefits based on health status, although there are exceptions for Wellness Programs. HIPAA nondiscrimination rules apply when a reward or penalty is both 1) related to a healthcare plan and 2) conditioned upon an employee satisfying a standard related to a health factor.
Thus, gift certificates, tickets or cash rewards to encourage the voluntary participation of similarly situated employees have no HIPAA applicability because they are not related to a health care plan.
Additionally, the following examples of programs that are not related to health factors are:
• A program that reimburses all or part of the cost for memberships in a fitness center,
• A diagnostic testing program that provides a reward for participation and does not base any part of the reward on testing outcomes,
• A program that encourages preventive care by waiving co-payments or deductibles under a group health plan for the cost of such programs as prenatal care or well-baby visits,
• A program that reimburses employees for the cost of smoking cessation programs without regard to whether the employee quits smoking, and
• A program that rewards employees for attending a monthly health education seminar.
However, HIPAA would apply when a Wellness Program conditions a health plan- related award upon achieving a standard related to a “health status factor” including:
• Smoker v. non-smoker rates;
• Premium discounts, deductable discounts or waivers, co-insurance discounts or waivers, etc., based on an employee’s weight being within acceptable limits;
• Premium discounts, deductable discounts or waivers, co-insurance discounts or waivers, etc., based on low cholesterol levels; or
• Premium discounts, deductable discounts or waivers, co-insurance discounts or waivers, etc., based on normal blood pressure readings.
1. Limited Reward-
The reward under the program, when added to all other program rewards, which are based on health status-related factors, may not exceed 20% of the total cost of employee-only coverage under the employer’s health plan. If spouses or beneficiaries participate in the wellness arrangement, this reward can be increased to 20% of the total cost of their coverage as well.
Note: In 2014, the Affordable Care Act increases a reward or penalty to 30 percent of the costs of coverage for employees who meet the standards of a Wellness Program.
The reward is based on total cost of the relevant coverage, not just what employees pay for their share of coverage. The reward can come in the form of discounts or rebates of premiums, waivers of all or part of a cost-sharing mechanism under the plan (such as deductibles, co-payments or coinsurance), the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan.
2. The program must be reasonably designed to promote health or prevent disease-
This is intended to be “an easy standard to satisfy.” The program must only be designed so that it has a “reasonable chance” of improving health, is not overly burdensome, is not a subterfuge for discrimination based on a health factor, and is not “highly suspect” in the method chosen to promote health.
This standard can be met as long as the program does not require “bizarre, extreme or illegal” actions. The new regulations point out that even experimental or non-scientifically proven procedures are allowed, and note that even a wellness program based on aromatherapy could meet these requirements.
3. Once-a-year qualification for the reward-
The program must give individuals eligible for the program the opportunity to qualify for the reward at least once a year.
4. The reward must be available to all “similarly situated” individuals-
This simply means that if someone’s medical condition keeps him or her from achieving a reward under the program, or if it is medically inadvisable for him or her to try to achieve the reward, then an alternative way to achieve the reward must be made available. If necessary, the Wellness Program may require verification of these circumstances, including a statement from an individual’s physician.
5. Plan disclosures-
Plan materials describing the terms of the program must disclose the availability of the reasonable alternative standard for similarly situated individuals, or if appropriate, disclose that the standard will be waived. Relevant regulations contain language, which can be used for this purpose:
“If it is unreasonably difficult due to a medical condition for you to achieve the standards for the reward under this program, or if it is medically inadvisable for you to attempt to achieve the standards for the reward under this program, call us at [insert telephone number] and we will work with you to develop another way to qualify for the reward.”
A reasonable alternative must be one that the individual can achieve without regard to his or her health factor, and could include simply following a physician’s advice regarding the health factor at issue.
Would the Genetic Information Nondiscrimination Act (GINA) apply to a Wellness Program?
GINA prohibits discrimination in employment and under health care plans on the basis of genetic information, which includes family medical history. Thus, if tan HRA is part of the Wellness Program, it should not solicit information about family medical history.
Would the Americans with Disabilities Act (ADA) apply to Wellness Programs?
The ADA, which applies to employers with 15 or more employees, prohibits discrimination against employees with disabilities. Non discrimination applies to activities sponsored by an employer including social and recreational programs. Thus, an individual with a disability should have equal access to any employer-sponsored activity available to a similarly situated individual who is not disabled. This may require a reasonable accommodation that will enable an individual with a disability to have an equal opportunity, unless a particular accommodation would impose an undue hardship.
The ADA also requires that all medical examinations must be job related. The Equal Employment Opportunity Commission has taken the position that an HRA is a type of medical examination and since that it is not related to job performance, it must a voluntary.
What is the first step to establishing a Wellness Program?
Upper management must be sold on the merits of the Wellness Program. This is challenging because of the difficulty in showing concrete ROI. Additionally, unlike investments in technology or machinery, the benefits of a Wellness Program are usually realized long term. On the other hand, most owners and managers would like to increase productivity, morale and teamwork relatively inexpensively, particularly at workplaces that depend on sustained performance and innovation.
What kind of Wellness Program is best?
It depends on the goals of the program. While the typical small employer program requires less time and effort for legal compliance, the activities associated with such a program - a basic HRA, monthly seminars, access to fitness centers, weight loss classes and smoking cessation programs - will have a minimal impact on absenteeism, presenteeism and health care costs. Such programs are adopted more for morale and team building more than for achieving a tangible ROI.
On the other hand, Wellness Programs that will likely result in positive and measurable impacts will require rewards and penalties consistent with federal regulations, particularly HIPPA. As such, such a program should be incorporated into an existing health care plan.
Outline for Wellness Program
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