Health Ultimatums: Fair or Discriminatory?

The answer to that question may be a moot point at many companies as they fight to save money on health benefit costs by cracking down on employees' bad behavior through wellness programs. A growing number of businesses are offering incentives to change workers' diets and lifestyles including offering cash bonuses and health club memberships in an effort to cut health risks.

But incentives are just the carrot part of the equation, which few would criticize. The stick component includes firing workers for smoking, screening job applicants for nicotine, and making weight a factor in hiring decisions.

Time Magazine calls this trend "Mandatory Health." The publication ranked it number nine in its feature "10 Ideas That Are Changing the World." And few would argue that it's here to stay. But companies that penalize employees for unhealthy habits such as smoking, and health-jeopardizing conditions, such as obesity, could run afoul of Department of Labor (DOL) rules and the Health Insurance Portability and Accountability Act (HIPAA).

Not all wellness plans pass regulatory muster -- specifically those considered "super wellness programs" that are more punitive than most plans or hand out more incentives than HIPAA wellness rules permit. These supplemental insurance plans are incorporated into traditional wellness programs and, according to The Wall Street Journal, they may face legal tests.

Here's how they work: employees enrolled in their employer's high-deductible health plan offset the deductible through a supplemental plan which doesn't come under HIPAA rules, by earning wellness credits for reaching certain goals. But critics say that unhealthy workers (those who can't earn wellness credits) could face higher deductibles than their healthier co-workers, which could be viewed by courts as discriminatory. The law says that a supplemental policy that is a group health-insurance coverage can't differentiate among individuals in eligibility, benefits, or premiums based on any health factor.

The Journal reports that the DOL is stepping up efforts to bring enforcement actions against rule breakers who use the supplemental plans to make an "end run" around HIPAA. Companies that wield sticks as well as carrots in their wellness programs must wield those sticks carefully.