In our September 2, 2021 QuickStudy available here, we outlined the various laws governing wellness plans and described how group health plans might structure a premium surcharge for employees who have not received the COVID-19 vaccine to fit within such existing rules. This week, the Departments of Labor, Health and Human Services, and the Treasury (collectively, the “Departments”) issued new Frequently Asked Questions (“FAQs”) that specifically address wellness plan compliance requirements for group health plan premium discounts or surcharges on vaccinated or unvaccinated employees, respectively.

Incentives and penalties under employee wellness programs implicate multiple federal statutes that prohibit discrimination on account of health status. These programs must meet specific requirements that are incorporated into the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), through the Affordable Care Act (the “ACA”), Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Americans with Disabilities Act (the “ADA”), and the Genetic Information Nondiscrimination Act (“GINA”). Please refer to our earlier QuickStudy for an overview of these requirements.

Requirements for an “Activity-Only” Wellness Program under HIPAA

The FAQs focus on wellness plan compliance with the requirements under HIPAA. Specifically, the FAQs confirm our position that a premium surcharge that applies when an employee fails to obtain a COVID-19 vaccination falls within the “activity-only” category of wellness programs under HIPAA because the employee must only perform or complete an activity related to a health factor to obtain a reward (or avoid a surcharge) under the wellness program. Such a program does not require the individual to achieve a specific health-related result.

To comply with HIPAA, an activity-only wellness program must satisfy the following five criteria:

  • The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year.
  • Based on all facts and circumstances, the program must have a reasonable chance of improving the health of participating individuals, cannot be overly burdensome, and may not be a veiled attempt to discriminate based on a health factor.
    The FAQs provide an example of a plan that maintains a toll-free hotline to answer questions about COVID-19 vaccinations and offers assistance to schedule appointments to receive a COVID-19 vaccination. According to the Departments, these facts and circumstances would indicate that the wellness program is reasonably designed to promote health or prevent disease because they help ensure that the program is not overly burdensome.
  • The total reward (or penalty), when combined with all other incentives under the plan’s wellness programs that require satisfaction of a standard related to a health factor, must be limited and cannot exceed 30% of the cost of the coverage in which the applicable employee and any dependents are enrolled.
  • The program must allow a reasonable alternative standard (or waiver of the otherwise applicable standard) for any employee for whom it is unreasonably difficult due to a medical condition to get the COVID-19 vaccine or for whom it is medically inadvisable to get the vaccine.
    In an example in the FAQs, the Departments state that providing an employee with the opportunity to attest to complying with the CDC’s mask guidelines would be a reasonable alternative standard because it would not be overly burdensome and would also be designed to prevent infection with SARS-CoV-2, the virus that causes COVID-19.
  • The plan must disclose in all materials describing the terms of the program the availability of a reasonable alternative standard (or the possibility of a waiver of the otherwise applicable standard).

Plans Cannot Discriminate as to Eligibility or Coverage Based on Vaccination Status

While there is an exception to the general prohibition on discrimination based on a health factor for wellness programs that meet federal standards, this exception is available only for premium discounts or rebates, or modifications of otherwise applicable cost-sharing mechanisms. The FAQs make clear that plans may not discriminate in eligibility for benefits or coverage based on whether an individual obtains a COVID-19 vaccination.

Application of Premium Discount or Surcharge to Determination of Plan’s Affordability

Under Section 4980H of the Internal Revenue Code, added by the ACA, employers may be liable for employer-shared responsibility payments if they offer coverage that is not affordable. The FAQs provide that a premium discount for an employee’s obtaining a COVID-19 vaccination must be disregarded for purposes of determining whether the offer of coverage is affordable for purposes of assessing liability for the employer shared responsibility payment. On the other hand, if a premium surcharge is applied, that surcharge would not be disregarded in assessing affordability.

COVID-19 Vaccination–Related Wellness Plan Compliance with the ADA and GINA Still Not Addressed

These FAQs focus on compliance with HIPAA’s wellness requirements, and do not address incentives offered by employers as part of workplace policies that are unrelated to their group health plans. The Departments direct employers who are considering the adoption of programs that incentivize COVID-19 vaccination to the FAQs that were issued by the Equal Employment Opportunity Commission in May, 2021, which we described in our September 2, 2021 QuickStudy. Consequently, it appears that there is still no official guidance on the application of the ADA and GINA to a wellness program providing a premium discount or surcharge related to COVID-19 vaccination.

This continues to be a rapidly developing area of the law. Please see our COVID-19 resource page here. If you have any questions on the current wellness program guidance or would like assistance with developing a COVID-19 vaccination policy, please reach out to one of our team members for assistance.

The post Locke Lord QuickStudy: New Guidance Issued on What Employers Must Consider Before Charging Higher ‎Group Medical Insurance Premiums for Unvaccinated Employees appeared first on Employee Benefits.

Photo of Stephen Kelly Stephen Kelly

Stephen Kelly focuses his practice on construction and development, including contract drafting and negotiating and construction-related litigation. Steve, Of Counsel in the Stoel Rives’ Construction and Design group, has represented private and public owners, developers, contractors and designers in many facets of development…

Stephen Kelly focuses his practice on construction and development, including contract drafting and negotiating and construction-related litigation. Steve, Of Counsel in the Stoel Rives’ Construction and Design group, has represented private and public owners, developers, contractors and designers in many facets of development and construction law. He has been listed in Best Lawyers in America® in the practice area of Native American Law from 2012 to 2015 and was selected by Best Lawyers® as Portland Native American Law Lawyer of the Year for 2013.