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Corporate Wellness Programs: Health Benefits With Some Legal Risks

Jennifer Post
Jennifer Post
business.com Contributing Writer
Updated Sep 01, 2022

Learn the benefits and risks of creating a corporate wellness program in your business.

As businesses struggle to hire and retain top talent, creating excellent employee benefits packages is becoming essential. Beyond health insurance and retirement plans, more businesses are offering flexible benefits that include corporate wellness programs.

But offering health and wellness benefits isn’t as straightforward as starting a walking club or offering discounts for local yoga classes. Employers must understand the legal risks and considerations involved anytime they become actively involved in employees’ personal interests.

We’ll explore how corporate wellness programs benefit businesses and employees, and examine the laws and legal considerations your business must understand when implementing such programs.

What are corporate wellness programs?

A corporate wellness program is a company-led initiative designed to improve or maintain employee health. The precise nature of individual wellness programs can vary considerably, but they may integrate various elements:

  • Gym or health club memberships offered for free or at a reduced rate to participating employees
  • Other staff discounts and incentives employees can use with external trading partners
  • Access to support services to help people establish and work toward fitness goals, such as losing weight or stopping smoking
  • Provision of therapy services for physical health and to support employee mental health, including stress management
  • Paid leave for fitness efforts and initiatives
  • Company-specific wellness schemes, including group support, challenges, and the provision of health-related information and guidance
  • The integration of a culture of wellness and holistic support for employees within the company ethos

FYIFYI: According to 2022 Zippia research, 52% of U.S. companies offer general wellness programs, 25% offer stress management programs and 18% offer meditation. Employees also report improved productivity after participating in wellness programs.

How do corporate wellness programs benefit your business?

Well-designed corporate wellness programs have significant business advantages, including money savings, improved morale and better employee retention.  

1. Corporate wellness programs can help a business save money. 

Successful corporate wellness programs can help companies save on health insurance and medical care costs. When companies support employees in their personal health journeys, the result is often reduced risk factors for illness and injury and generally improved health.

“Major risk factors for chronic illness include inactivity, smoking and heavy alcohol usage. The most expensive conditions for health insurance and medical care are cancer and heart disease,” explained Daniel Foley Carter, director at SEO-Audits.io. “You can improve your employees’ general health and lower healthcare costs if your employee wellness program takes these variables into account. Long term, it will also have a favorable effect on the financial health of your business.”

Did you know?Did you know? According to CDC data, well-implemented workplace health programs can lead to 25% savings on workplace absenteeism, health care costs, workers’ compensation and disability management claims costs.

2. Wellness programs can improve morale and productivity.

The company will benefit from less time lost to employee illness. With higher attendance comes improved overall business performance and productivity. Additionally, wellness programs can boost employee morale.

“Employees who participate in wellness programs feel valued and respected,” said Sep Niakan, managing broker at Blackbook Properties. “When workers feel respected and appreciated by their employers, they are happy. Employee enthusiasm at work frequently increases when wellness programs are offered.”

Niakan also said that healthy eating and regular exercise are likely to increase an employee’s productivity because they can focus better and require less time off due to illness or injury.

3. Wellness programs increase employee retention.

For many companies, corporate wellness programs add value to the total employee benefits package, providing incentives to current and future workers, increasing employee retention, and enabling the company to remain competitive within the labor market.

Paul Somerville, editor-in-chief and hardware program manager at Electric Scooter Guide, agreed that wellness programs significantly impact employee retention.

“Employee loyalty can be increased by an employer [that] offers a wellness program and encourages staff to work toward reaching their individual objectives,” Somerville said. “Offering a wellness program to your staff demonstrates your care for their health and happiness. [Employees] are more inclined to stay rather than look for work elsewhere when you view [them] as valuable assets of your business.”

TipTip: Consider using HR reporting tools to track employee turnover automatically. If your rates are too high for your industry, create a plan to retain talent and reduce turnover costs.

Federal laws pertaining to corporate wellness programs

There are many positives to creating a corporate wellness program, particularly for larger companies and those with a strong ethos of investing in their employees. However, corporate wellness programs also come with risks. Understanding and mitigating these risks is crucial for limiting your company’s liability.

When a company offers a wellness program, it displays a direct personal interest in its employees’ health and well-being, which can have implications for employee equality and privacy. The more a company’s wellness program is formally structured and involved, the more it risks running afoul of federal laws.

The core federal laws that pertain to corporate wellness programs include the following:

  • HIPAA: The Health Insurance Portability and Accountability Act (HIPAA) sets core standards governing the collection of personal and identifying information about employees, including their health. HIPAA laws also cover data usage and storage. According to David Reischer, attorney at LegalAdvice.com, a wellness program is subject to HIPAA only if it’s part of a group plan. If not, it may be subject to other state or federal laws, but not HIPAA. “A health program cannot discriminate based on a health factor for eligibility or for receiving discounts,” Reischer said. “As such, a wellness program cannot offer a reward or rebate or a penalty under HIPAA to target health standards. For example, a discount in premiums cannot be offered to persons that have cholesterol levels under 220.”
  • ERISA: Under the Employee Retirement Income Security Act (ERISA), employers are prohibited from discriminating against employees because of their health status. However, there is a narrow exception within ERISA to permit employers to offer discounts on wellness services based on the health status of any given employee.
  • GINA: The Genetic Information Nondiscrimination Act (GINA) dictates that employers must not require or request that employees provide genetic information about themselves, such as their family history or the presence of hereditary health conditions.
  • ADA: The Americans with Disabilities Act prohibits discrimination against employees on the basis of health or health status, with certain exceptions in place for voluntary participation in wellness programs. “For example, if there is a company program to participate in ‘Walk 5 Miles a Week’ or a charity walk-a-thon that offers incentives to participate, this may be unlawful if there is no alternative program for disabled employees,” Reischer said. “The wellness program would be unlawful even under a plan that is not a group plan under HIPAA.” Under the ADA, employee participation in corporate wellness programs must be voluntary. It is permissible to incentivize employees within the limits outlined under the Affordable Care Act, but employers cannot mandate participation or penalize employees for refusal to partake.
  • ACA: The Affordable Care Act (ACA) specifically restricts the allowable cost of corporate wellness program incentives to 30% of the cost of health coverage.
  • ADEA: Under the Age Discrimination in Employment Act (ADEA), a wellness program can’t discriminate against a person because of their age. “Wellness programs must be designed so that older workers are able to meet the criteria for eligibility and participation,” Reischer said. “For example, if the program had health standards that did not take the individual person’s age into consideration, that program would be unlawful even under a plan that is not a group plan under HIPAA.”

FYIFYI: As an employer, you should also be aware of anti-discrimination workplace laws at both the state and federal levels.

It’s also crucial for employers to consider informed consent and confidentiality. 

1. Employers should ensure participants give informed consent.

Companies are strongly advised to incorporate a comprehensive, legally compliant waiver into their corporate wellness programs to reduce the risk of lawsuits by employees who may become injured or otherwise adversely impacted by wellness program participation.

“It is important to make sure that employees give their informed consent,” said Shaun Martin, owner and CEO of Denver Real Estate Solutions. “This means that they should be aware of what the program entails and what their rights are. Furthermore, they should be given the opportunity to opt out of the program if they do not wish to participate.”

2. Wellness programs must prioritize confidentiality.

Confidentiality is crucial in any wellness program. “Employees should be assured that their personal health information will be kept confidential and will not be used for any purpose other than the wellness program,” Martin said.

Confidentiality is a significant part of other federal laws. Still, employers should clearly prioritize confidentiality in the wellness program guidelines and instructions instead of assuming employees have a full understanding of federal discrimination laws.

If you need help with implementing a legally compliant corporate wellness program, require guidance or are facing litigation due to your corporate wellness program, you may want to speak with an employment lawyer.

Justin Walker contributed to the writing and reporting in this article.

Image Credit:

one photo/Shutterstock

Jennifer Post
Jennifer Post
business.com Contributing Writer
Jennifer Post is a professional writer with published works focusing on small business topics including marketing, financing, and how-to guides. She has also published articles on business formation, business software, public relations and human resources. Her work has also appeared in Fundera and The Motley Fool.