Given the rising costs of employee health-care benefits, companies are increasingly seeking ways to trim expenses. Most employers offering health insurance coverage shoulder 70 percent or more of the tab, which rises annually. Health-care costs are projected to grow an average of 6.7 percent annually between now and 2017.

When examining insurance costs, risk managers often discover that one of the biggest line items is employee health-care coverage. In many organizations, employee benefits are within the risk manager's responsibility. In other firms, this duty either falls to the human resources manager or represents a shared responsibility.

Wellness programs embody the idea that fitter employees are healthier and use fewer health insurance benefits. The less employees use these benefits, the greater the cost savings. Furthermore, healthier employees are productive, accomplish more on the job, and are less prone to absenteeism. Wellness programs can incorporate the following:

  • Free or low-cost screening for diseases.
  • Fitness facilities offered for free or at discounted rates to employees.
  • Financial incentives for employees who lose weight or quit smoking. Conversely, financial disincentives for employees who engage in certain unhealthy activities.
  • Sponsoring on-the-job health and exercise sessions or seminars.
  • Paying for a portion of employees' off-site health club memberships.

Companies can incentivize employee participation in many ways. Some offer cash incentives, while others charge lower health insurance premiums. Better yet, businesses may even publicly praise and recognize employees who, for instance, successfully quit smoking or lose 20 pounds. Employers can use such "carrots" to maximize and motivate worker participation in wellness programs.

Wellness Program Pitfalls

Clearly the positives in employee wellness programs are plentiful, but there are drawbacks as well. What exactly are the risks and risk management issues associated with implementing such programs? The reality is that wellness programs — no matter how well intentioned — can spawn employee lawsuits. For example, a Scotts Miracle-Gro employee in Massachusetts sued his company for firing him after he tested positive for nicotine. This violated a company policy that banned both on- and off-the-job smoking. Michigan firefighters sued their fire department over a cholesterol screening that required periodic blood tests. The firemen claimed this violated their Constitutional rights.

Employers instituting wellness programs should seek the advice of legal counsel who specializes in employment issues. Landmines abound, including possible violations of the Americans with Disabilities Act (ADA); Health Insurance Portability and Accountability Act (HIPAA); and Title VII of the 1964 Civil Rights Act, which prohibits age, race, or sex discrimination.

Further, 29 states have enacted so-called "lifestyle discrimination" laws. These ban companies from retaliating against workers for legal, off-duty activities. The moral is this: find a lawyer steeped in employment law. Such attorneys can alert you to buried tripwires and help you navigate around them. There is no point saving money on employee benefit costs only to witness those savings offset by higher legal fees, jury awards, and elevated premiums on employment practices' liability insurance coverage.

Big Brother Backlash

At play here is a deeper issue. How intrusive can and should employers be in regulating employees' off-duty lifestyles? While at home, employees may smoke, eat Ben and Jerry's Chunky Monkey, or collapse on the Barcalounger instead of working out. But should they be financially penalized for those decisions? Some employees may comply, whereas others will resent Big Brother.

Others may resist or even file lawsuits alleging discriminatory employment practices, while some may vote with their feet, ultimately leaving a company that adopts heavy-handed policies under the guise of wellness. This poses a "flight risk" of talent from these firms. Maybe Joe, who may be regarded as corpulent, costs the company more in employee health insurance. However, Joe may more than offset this added expense through efficiency, the ideas he generates, the projects he leads, and the new clients he attracts. In such circumstances, does it make sense to impose financial penalties because Joe doesn't hit the treadmill three times a week?

Another potential liability from employee wellness programs is claims arising from sudden cardiac arrest (SCA). It is important to note that SCA is not the same as a heart attack, afflicting even seemingly healthy people. As many as 350,000 Americans die from SCA each year. Health clubs have faced liability claims and suits from relatives of people who died of SCA while exercising. Theories of liability often center on two concepts: the facility was negligent in not having an automated external defibrillator (AED) available, and/or the facility was negligent in lacking on-site personnel trained in life-saving techniques, including instruction on using AEDs.

Liability claims against health clubs could become workers' compensation or employer liability claims if SCA causes death from employees exercising pursuant to an employer's wellness program. This will affect adjusters who handle claims, conduct investigations, and determine whether such accidents arose out of and in the course of employment.

Addressing Risks

While wellness programs have perils, risk managers have tactics with which to address them. This could be through simple avoidance, as in forgoing a wellness program altogether because of the costs, drawbacks, and so on. A toolbox profile might also encompass the following:

  • Retention – Accept the chances of liability claims and fund them internally.
  • Loss Control – Make programs bulletproof through tight regulatory compliance. This could mean prescreening participants and not only stocking AEDs but also training employees on its appropriate use.
  • Transfer – Buy employment practices' and/or employers' liability insurance coverage to address claims and suits from employees who balk at wellness programs.

Sure, corporate wellness plans have risks. Doing nothing and paying higher benefit premiums each year carries risks, too. The trick is balancing the risks with the rewards: incentivizing healthy lifestyle habits while dodging the potholes. Companies that successfully navigate the wellness landscape will become more fiscally fit as their employees become more physically fit.

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