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Updated Mar 18, 2024

Corporate Wellness Programs: Health Benefits With Some Legal Risks

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

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Jennifer Post, Senior Writer & Expert on Business Strategy
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It can be challenging for smaller businesses to attract and hold on to top-level employees. One compelling way to do so is by offering employee benefits packages that go beyond health insurance and retirement plans. An increasing number of firms are now including flexible benefits like corporate wellness programs. 

However, setting up health and wellness benefits isn’t as simple as organizing a walking group or offering yoga class discounts. You must recognize the potential legal implications and issues when you start participating actively in your employees’ personal lives. 

We’re going to delve into how corporate wellness programs can aid both companies and their employees. More importantly, we’ll shed light on the rules and legal aspects a business must adhere to when launching these programs. 

What are corporate wellness programs?

Corporate wellness programs are initiatives led by a company to boost or sustain the health of employees. There are no hard and fast rules about what these programs should include, as they could differ from one company to another. Some examples are: 

  • 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
FYIDid you know
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. 

Creating robust wellness initiatives can lead to significant health-related savings for small businesses. By backing your team’s personal health goals, you’re likely to decrease the risk of sickness and accidents, resulting in overall better 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.”

TipBottom line
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

Creating a wellness program at your business has many benefits, especially for big companies or ones that value their employees’ growth. But, it’s also important to recognize that wellness programs can carry certain risks. Knowing and managing these risks can help protect your business. 

Having a wellness program shows your business really cares about the health and happiness of your employees. But, this can also bring up issues related to fairness and privacy at work. 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.”
FYIDid you know
As an employer, you should also be aware of anti-discrimination workplace laws at both the state and federal levels.
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Jennifer Post, Senior Writer & Expert on Business Strategy
Jennifer Post brings a decade of expertise to her role as a trusted advisor for small business owners. With a strong foundation in marketing, funding, human resources and more, she teaches entrepreneurs about the software and tools necessary for launching and scaling successful ventures. From email marketing platforms to CRM systems, she ensures businesses have the technological edge they need to thrive while also sharing best practices for everyday operations. Post's recent focus on risk management and insurance underscores her commitment to equipping business owners with the services needed to safeguard their businesses for long-term success. Her advice has appeared in Fundera, The Motley Fool and HowStuffWorks.
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