Wellness Programs: Remedy or Risk?

Published: Jan 24, 2019
Modified: Mar 26, 2020

By Lorrie Lykins

It’s a given that a healthier workforce is a more productive workforce. With this in mind, employers have looked to wellness programs to improve performance and save money on health-care costs. In theory, such programs are a win-win: Employers get bottom-line results and employees gain improved well-being and fitness—not to mention relief from out-of-pocket medical expenses. But sometimes improving wellness is a tricky proposition.

Methods for developing employee buy-in to workplace wellness programs run the gamut from offering incentives such as discounted health-care premiums to giving cash rewards for quitting smoking or using the gym. Positive reinforcement is one thing, but imposing higher premiums on smokers or obese employees—which might seem like a fair strategy to employers—can be a morale killer when perceived as a harsh penalty. Moreover, such practices might violate rules set by the U.S. Department of Labor (DOL). In order to stay out of hot water, “Wellness programs must be carefully structured to comply with a patchwork of state and federal laws that may apply depending on the nature of the program,” cautions employee benefits attorney Joseph P. Lazzarotti of Jackson Lewis LLP (Lazzarotti 2006).

Early in 2008, the DOL's Employee Benefits Security Administration (EBSA) published a checklist that spells out new regulations regarding wellness programs. The rules address wellness programs that offer employees discounts on higher deductible healthcare plans through two avenues: simply participating in a wellness program and/or achieving specific health goals such as weight loss or lower blood pressure (“Final,” 2007). By enrolling in such workplace wellness programs, employees usually become, in effect, covered by a form of supplemental health insurance. But the EBSA guidelines say that employees with documented health problems that affect their ability to participate in such programs cannot in some cases be penalized by higher deductibles (Knight 2008).

The EBSA regulations speak to the Health Insurance Portability and Accountability Act (HIPAA) of 1996, which generally bars group health plan providers from discriminating against workers based on health factors by the imposition of higher benefit premiums. Such factors include history of health care received and current health status. HIPAA does, however, make exceptions that allow for higher premiums based on employee participation in wellness programs, but those programs must offer alternatives to employees who, for established medical reasons, cannot meet the program goals. Wellness program materials must disclose the availability of such alternatives (U.S. Department of Labor, 2008). For example, workers can seek documentation from a physician stating that they cannot quit smoking due to nicotine addiction or they cannot participate in exercise due to mobility issues related to obesity. Unless the employer offers employees viable alternatives, such as nicotine gum, patches or other helpful medication, it cannot legally charge the worker a higher premium for health-care coverage (“U.S. Employers,” 2008).

Another consideration is that wellness initiatives such as smoking cessation programs could also result in employees alleging privacy infringements or even Americans with Disabilities Act (ADA) violations. In addition, the establishment of wellness benchmarks might be a problem; incentive programs that hold all participants to the same goals could be viewed as unlawful. In fact, the EEOC is currently investigating “aggressive” wellness programs it says may violate the ADA (“EEOC,” 2007).

Whether such programs are employer-run or administered by a health insurer or wellness program vendor, experts say that employers should be well-versed in the laws, which vary from state to state. Currently, it is permissible in 21 states to implement HR policies addressing workers’ personal habits, such as drinking too much, overeating or smoking. But some states have “lifestyle” statutes that might prohibit such policies (Conlin 2007).

Legal concerns aside, employee buy-in and hoped-for positive results are largely dependent on the tone of implementation. Even with the best of intentions, such initiatives can fall flat. “Whether legal or not, employers’ efforts to effect changes in employees’ personal lifestyles can, at a minimum, lead to an unhappy or under-performing workforce, and even to the loss of talented employees who are uncomfortable with an employer’s scrutiny of their personal lives,” said Susan Lessack, a law partner with Pepper Hamilton LLP (“U.S. Employers,” 2008).

With no apparent end in sight to the high cost of health insurance, wellness programs are not the total solution, but they can certainly help mitigate expenses for employers. Compliance with HIPAA regulations, however, does not guarantee that all wellness programs comply with other laws regarding discriminatory practices and employee privacy. Implementation of such programs requires careful planning in order for employers to make sound decisions about how to best improve the health of employees as well as the organizational bottom line.


Conlin, M. (2007, February 26). Get healthy—or else. BusinessWeek.

EEOC eyes the new breed of wellness programs. (2007, December 11). HR Specialist.

Final regulations on HIPAA nondiscrimination and wellness programs. (2007, February). Employee Benefits Developments.

Knight, V. E. (2008, January 17). DOL probes rights of unhealthy workers. Wall Street Journal Online.

Lazzarotti, J. J. (2006, June). An introduction to wellness programs: The legal implications of “bona fide wellness programs.” Bender’s Labor & Employment Bulletin, 270-277.

U.S. Department of Labor. (2008, February 14). Field Assistance Bulletin No. 2008-02.

U.S. employers trying to regulate employees’ behavior when they’re off duty. (2008, February 6). Industry Week.

About the Author(s)

Lorrie Lykins, Institute for Corporate Productivity
Lorrie Lykins is an associate with the Institute for Corporate Productivity (i4cp).