Column: A federal judge takes aim at ‘voluntary’ company wellness programs that invade your privacy

Companies love “wellness� programs for a number of reasons. These smoking-cessation, weight-loss and disease-screening programs give workers the impression that their employers really care about their health. Ostensibly they save money, too, since a healthy workforce is cheaper to cover and less prone to absenteeism.

That’s the touchy-feely story. The dark downside is that “voluntary� wellness programs also give employers a window into their workers’ health profiles that is otherwise an illegal invasion of their privacy.

That’s the aspect that bothered Federal Judge John D. Bates of Washington, D.C., just before Christmas, when he overturned a federal rule that arguably permitted employers to coerce their workers into giving up private medical information that could be used to discriminate against them. The rule will be nullified as of Jan. 1, 2019, unless the government comes up with a better version before then.

The rule had come from the Equal Employment Opportunity Commission, which oversees how employers comply with the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act. Both limit how much information companies can demand from their employees and how they use what they know.

The laws say it’s alright for workers to give up the information “voluntarily,� so the legal question became: What’s voluntary? The question is important, because some companies offered generous incentives for participation, such as large discounts on health plan premiums; seen another way, this was the same as equally large penalties for nonparticipation.

In 2015, the EEOC proposed a rule treating wellness programs as “voluntary� if they involved premium differences of no more than 30% of the full cost of a health plan. Worker advocates were aghast — 30% of a full-price premium could amount to thousands of dollars, and since the workers’ share of their health plan premiums often was only 30% or so, the penalty could double their annual costs. For many families, that made voluntary programs effectively mandatory.

The critics included the AARP, which sued to block the EEOC rule in 2016. In ruling in AARP’s favor in August, Bates observed that the 30% incentive “is the equivalent of several months’ food for the average family, two months of child care in most states, and roughly two months’ rent.� He recognized that a fee of that magnitude could be especially coercive to lower-income employees and people with disabilities, “who on average have lower incomes than those without disabilities.�

Bates found the EEOC rule unlawful but, strangely, left it in place while the EEOC tried to rewrite it, on the grounds that it would be too difficult for employers to rejigger their programs in the near term. On Dec. 20, however, he overruled himself, finding that a year is more than enough lead time.

Before we get further into Bates’ reasoning, a few words about wellness programs are in order. We’ve questioned the usefulness of these programs, and the indulgence they’ve been given by the EEOC, in the past. (See here, here and here.) About half of all employers offer wellness programs in one form or another, ranging from nutritional advice, free health screenings and discounts on health club membership (so-called lifestyle management programs) all the way up to proactive therapy for those with such chronic ailments as diabetes, asthma and depression. The lighter versions are by far the more prevalent.

The biggest problem with wellness programs is there’s no evidence that they work. The most frequently cited statistic in their favor came from Safeway, whose claim to have saved on per capita healthcare costs after implementing a wellness program prompted drafters of the Affordable Care Act to liberalize the incentive rules. But Safeway’s story was soon debunked. Other supposed success stories came from wellness program promoters themselves, who were engaged in selling their wares to big employers.

Empirical evidence of the programs’ efficacy is sparse, and what does exist is of questionable validity. According to a paper published this year by healthcare experts Adrianna McIntyre, Nicholas Bagley, Austin Frakt and Aaron Carroll — the all-pro frontline of the health policy blog the Incidental Economist — the most consistent conclusion is that “lifestyle management� programs are almost entirely ineffective, but programs focused on managing workers’ chronic diseases “hold substantially more promise.�

A 2013 study by the Rand Corp., for instance, determined that participants in workplace weight-reduction programs lost an average of a single pound by the second year of participation, an effect that had all but evaporated by year four. A seven-year study of a large wellness program at PepsiCo, however, found that while the company saved $1.46 for every dollar it spent, the savings came entirely from disease management — lifestyle management lost more than fifty cents of every dollar spent.

If the programs don’t save on healthcare costs, their real attraction for employers may be the ability to shift costs to workers — especially sicker and older workers. Coercive penalties that force workers to reveal sensitive information that could prompt employers to discriminate against them, sometimes through the subtle means of steering them away from certain jobs or limiting their promotion opportunities. Millions of Americans dependent on their employment for health coverage may not feel free to deny their employers access to their private lives or a voice in their medical treatment.

That concern was at the heart of Judge Bates’ rulings. Initially, he found that the EEOC had done nothing to establish that a 30% incentive or penalty was consistent with voluntary participation in wellness schemes. But at first he accepted the commission’s argument that vacating its rule immediately, in the middle of the 2017 health plan year, would cause “potentially widespread disruption and confusion� for employers, their insurance companies and their workers.

But he was uneasy at the EEOC’s plan to give itself until October 2019 to rewrite and issue a new rule, which meant that it might not be effective until the beginning of 2021. “If left to its own devices, the EEOC will not have a new rule ready to take effect for over three years,� he wrote, adding that such a time frame wouldn’t meet his order that the commission act “in a timely manner.� Instead, he said, the old rule will die at the end of 2018. It’s up to the EEOC to have a new one in place by then.

But the right approach would be to do more than narrow the definition of “voluntary.� The EEOC should consider why any incentives and penalties should be acceptable. “Most programs do not work,� McIntyre and her colleagues concluded. “It is time for employers and policymakers to rethink their enthusiasm for the wellness movement.�

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