Crossing the line?

Do some health-contingent wellness programs risk employee privacy?

From the pages of In Business magazine.

With health care costs skyrocketing across America, businesses are continually looking for that magic bullet to help control costs now and into the future. Wellness programs have proven to be a viable tool toward that end, encouraging employees to live healthier lifestyles so they can ward off medical issues and, in turn, help with corporate health insurance costs.

But as companies encourage participation in such programs, might they sometimes run the risk of overstepping privacy bounds?

The intentions are good, opines Thomas Shorter, Godfrey & Kahn shareholder and leader of its health care practice group. Money saved on health care plans can be redirected toward other overall benefits, such as wages, “but part of it gets a little nosey into the habits that we all have around smoking, drinking, or all the things you don’t want to tell your physician,” he laughs.

Shorter says the U.S. Equal Employment Opportunity Commission is watching this issue closely to see that companies don’t impose health-contingent wellness plan guidelines that are so strict they become discriminatory.

“What happens when you garner that [health] information and try to influence behavior?” Shorter asks. Could a company tell an employee that their health insurance rate would go up if they didn’t stop smoking cigars, for example?

In Wisconsin, employers are not allowed to discriminate based on whether a person smokes or not, but that’s not the case everywhere. In 2006, Ohio-based Scotts Miracle-Gro Co. made the decision not to hire smokers because it claimed smoking-related health care costs were too high. That same year, it fired a new hire because a urinalysis revealed the man had nicotine in his system. He sued the company but lost.

Scotts wasn’t the only company adopting such policies. Health care centers and hospitals around the nation adopted similar plans.

At the time, a related CNN story quoted Dr. Michael Siegel, Boston University professor of public health, who blasted an Atlanta-based medical center for its smoke-free hiring policy: “Regulating someone’s private behavior in their own home … really represents employment discrimination and has nothing to do with qualifications for the job. If the hospital is so concerned about health, you can make the exact same argument about overweight people.”

Fast-forward to 2015.

Shorter says it becomes a risk shifting versus privacy issue. “Who bears the risk financially for bad habits from a health perspective? If someone allows their weight to balloon to morbid obesity, who accepts the fiscal responsibility of the resulting health care costs? There’s good debate out there about that.”

Some believe the employee should, while others follow the school of thought that everyone ought to chip in to share costs for all.

“In an increasing number of cases, obesity has been deemed a disability under the ADA,” notes Jennifer Mirus, attorney with Boardman and Clark LLP. “Generally, in order to make that finding, the obesity has to be tied to some sort of underlying psychological or physical condition, like a thyroid condition or something, but the fact of the matter is, it is being found to be a disability.

“Basically, employer considerations of physical attributes have to be job-related. That’s the general standard.”

Because there can be a requirement that the employee undergoes a medical assessment in defined health-contingent wellness program, she explains, those programs must be carefully designed and implemented to comply with state and federal law.
“If you tell someone that you’ll pay 90% of their health insurance premium if they undergo medical tests, that’s deemed a penalty against those who will not do the test,” she says.

Wisconsin also has laws protecting employees’ use of lawful products, including alcohol or tobacco, with only a few very specific exceptions, she says. For that reason, employers can’t include a company policy in their employee handbooks stating that employees would face termination if found to be using lawful products on their own time and away from the job.

Proceed with caution, she advises employers setting up a corporate wellness program. “There are many laws that impact an employer’s consideration of health-related information in the workplace.”

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All eyes on wisconsin

Interestingly, Wisconsin is already in the national spotlight because of two lawsuits the EEOC recently filed against Orion Energy Systems in Manitowoc and Baraboo-based Flambeau Inc. related to the administration of their health-contingent wellness programs.

In Orion’s case, according to an EEOC release, after a female employee refused to submit to medical exams and disability-related inquiries required as part of the company’s wellness program, she was told she would have to pay 100% of her employee health benefits. She quit soon after.

In the Flambeau case, the EEOC maintains an employee similarly refused to undergo medical tests and biometric testing required as part of the wellness program. In response, the company cancelled his health insurance and shifted responsibility for the entire payment premium cost to him. Meanwhile, the release states, Flambeau employees agreeing to take the tests only had to pay 25% of their premium costs.

Both cases are in federal court.

“I think part of the crux of those claims are really driven where the government essentially has said that the strict mandates the employer imposed have simply gone too far,” Shorter says.

Todd Cleary, shareholder and benefits lawyer with Godfrey & Kahn, notes that while a plan’s requirements may not raise privacy issues, it could be perceived as being too intrusive from an employee’s standpoint.

“In recent years, more of the focus legally has been on potential violations of the Americans With Disabilities Act by employers and their wellness programs, which isn’t necessarily a privacy issue. Then, another major legal area for wellness programs is HIPAA and some of its discrimination rules where employers can’t discriminate against workers on the basis of their health factors.”

The pending Wisconsin cases may have been caused by some ambiguity on the EEOC’s part, he suggests, for which the agency took a lot of criticism. This past spring, it finally issued some proposed regulations to help clarify when it would conclude something is going too far. “Now at least we have an idea,” Cleary says. “Before those rules came out, we were providing educated guesses to our clients.”

Still, he says, even if employees perceive an employer’s health-contingent wellness plan mandates as intrusive, it doesn’t mean privacy has been breached. “So while I think that yes, privacy has been a concern amongst employees and regulators, I think it’s a little bit bigger than that. It’s really the intrusiveness of the behavior and whether employers have been overstepping their bounds in that regard.”

Asked if employees should be concerned about employers peeking into their personal health records, Cleary scoffs. “Actually, employers are well-suited not to want to know much about their employee’s health conditions if they can avoid it,” he said. Not knowing makes it difficult for an employee to prove discrimination.

Generally, a third-party vendor conducts the wellness program medical tests, which must be offered on a voluntary basis. “If the program is set up right, the employer would not see the information in question. There’s no reason for them to see that on an individual basis.”

Employees opting out could see their premium or deductible rates increase, so long as all is in keeping with ADA, EEOC, and HIPAA rules.

Cleary says HIPAA privacy rules also provide some safeguards. “Generally, employers are not going to have to know any more than they have to because they’d potentially expose themselves to a disability claim if they know about the employee’s health condition.”

He cautions employers, however, from assuming that if by complying with HIPAA rules, they automatically comply with ADA rules, or vice versa. “They’re not vastly different, but they are different enough that the employer could easily trip up.

“There’s a real tension here,” he admits. “Employers are really trying to identify ways to wring the costs out of their health plans, and wellness is an attractive option. A dollar spent on a wellness program seems to pay dividends down the road, yet on the other hand, employees are sometimes rightfully concerned that a wellness program may be overly intrusive, so the ideal thing is for the employers and the regulators to find the sweet spot.”

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Scoring sense

Madison’s M3 Insurance, an independent insurance agency, works with many large corporations running voluntary health-contingent wellness programs that require medical tests for participation. Health-contingent programs generally require individuals to meet a specific health standard to obtain some sort of reward that is usually, but not always, tied to some type of insurance premium relief.

Individual health scores help employers determine how to dole out insurance premium discounts, so insurers also have a lot of skin in the game.

Jon Healy, partner and senior account executive at M3, says a person’s health score is a measure of multiple factors, not just BMI (body mass index) number, for example, or blood pressure. At the same time, an illness or condition doesn’t necessarily mean a person will be penalized.

A combination of several factors can trigger a higher premium (or less of a discount). “But if a person works with a health coach or takes other corrective action to improve their health, such as a smoking cessation course, which most wellness programs do offer, they would not be penalized.”

Privacy is maintained, he said, because the exchange of information between insurance companies, third-party vendors, and employers does not include specific health detail. Rather, employers simply receive a list of names placed into pre-determined discount levels (sometimes presented as platinum, gold, silver, or bronze) based on their score. “The employer needs to know what group of people are in which bucket, but they’re not told the score.”

On the other hand, if an employee smokes, drinks, is overweight, has high blood pressure, high blood sugar, and refuses to do anything about it, their employer is allowed by law to charge them 30% more for their premium. In fact, Healy says, sometimes people agree to pay the extra 30% simply because they don’t want to change their habits.

So if individual health records are off limits for privacy reasons, how do insurance companies determine their rates? First, insurers don’t rate small companies (50 or fewer employees) based on health factors.

In contrast, a 500-person company can be underwritten by an insurer that knows just how many unhealthy workers exist based on the sheer number of health claims they file.

Whether a self-insured employer group, with data handled by a third-party administrator, or a fully insured group such as WPS, Dean Health Plan, or Physicians Plus, Healy says insurers receive aggregate — not individual — reports about the company’s participants that might indicate “four people with cancer” or “two people with uncontrolled diabetes.”

“They give that information out because other insurance companies simply wouldn’t look at that risk without knowing what they’re getting into,” he explains. “They want to know as much information as possible so they know the amount of risk they’re taking on. It’s a very complex issue because so many different factors are involved in determining someone’s cost.”

Conceivably, the larger the employer, the less that matters because of the higher ratio of healthy versus unhealthy employees. “Say it’s 90%-10%,” Healy suggests. “If 10% of the 500-person company’s employees are considered unhealthy, that means 50 people are in poor health, and that will drive rates up pretty substantially because the insurance company has to collect enough money to cover the claim costs.”

So, with electronic health records information whizzing throughout the Cloud, the question is: Does true privacy still exist, or has our definition of it changed?

Mirus (Boardman and Clark) believes it exists, but it’s also evolving.

“The issue of privacy and confidentiality of our health information is a preeminent concern for most Americans,” she says, “but when you think about the intersection of technology and social media and how much information we all have about each other these days, and the fact that most employers are linked in social media with someone in the workforce, it’s impossible that these issues do not make their way around companies.

“We know so much more about each other than we used to.”

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An employer's view

The success of one Baraboo company's wellness plan

Teel Plastics is a custom manufacturer of plastic tubing. With 250 employees, the company launched its first wellness program 14 years ago, and 70% are currently participating. Kim Meyer, the company’s director of human resources, recently discussed how it works, and how employee privacy is not compromised.

How does Teel avoid privacy issues?
Meyer: Our plan maintains all confidences it always has — before and after implementation of our health-contingent wellness plan. Voluntary, annual health risk assessments are completed through an outside vendor and include biometric screening followed by a short online questionnaire. In the end, the employee receives a very detailed, 15-page personal comprehensive wellness report via their online account.

What does the employer see?
Meyer: As the employer, we do not receive individual employee information from [either] the biometric screening or online questionnaire. Our vendor provides us with an aggregate report showing trends, improvements, and opportunities broken down by health risks. It also highlights changes from year to year and compared to all other manufacturing companies, and shows both the positive and negative changes as a group.

What does Teel Plastics do with the information?
Meyer: We use this data to determine target areas when creating our wellness initiatives for the following year. The vendor also provides us an employee distribution of overall wellness scores. Our employee’s medical premiums are divided into a three-tiered premium structure (Gold/Silver/Bronze). Your wellness score determines which premium level you are in.

Have you heard complaints from employees?
Meyer: Originally, we did hear a few complaints from employees about not wanting to complete the biometrics portion of the health risk assessment. I don’t think anyone would say getting poked by a needle for a blood draw is fun but now that we have been doing it for several years, I think that is behind us. I think employees really look forward to getting their results and seeing how they compare year to year. It can be very eye-opening for many folks.

And if an employee refuses to participate?
Meyer: Employees who decide they do not want to participate in the annual health risk assessment will be put in the Bronze (highest) premium category for the year and can make that determination each year.

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