Last week the federal Departments of Labor, Health and Human Services, and the Treasury issued joint FAQs that address questions regarding COVID-19 vaccinations and group health plans.  The FAQs are particularly relevant to those employers considering whether to provide incentives or impose surcharges under their group health plans to encourage employees to become vaccinated.  Here’s what employers need to know:

Required Coverage for COVID-19 Vaccines.The FAQs confirm that health plans must cover the full cost of COVID-19 vaccines (and their administration) that have received an Emergency Use Authorization from the CDC or have been approved by the Food and Drug Administration.

Eligibility for Benefits or Coverage Cannot Be Conditioned on Vaccination Status. According to the FAQs, health plans and their sponsors may not exclude individuals from benefits or coverage based on their vaccination status.

Vaccine Incentives Must Comply with HIPAA’s Nondiscrimination Rules for Health-Contingent Wellness Programs.  The FAQs provide that vaccine incentives offered in connection with employee health plan contributions must comply with the requirements applicable to health-contingent wellness programs.  In other words, if an employer’s plan offers a health coverage premium discount for vaccinated employees, such an incentive program must:

  1. Allow individuals to qualify for the incentive at least once per year.
  2. Be reasonably designed to promote health or prevent disease. (This requirement seems self-fulfilling.)
  3. Be available to all similarly situated individuals. This includes providing a reasonable alternative for those individuals who cannot be vaccinated for medical reasons to qualify for the discount.  The FAQs provide an example: an individual who is unable to receive the vaccine, but who attests to complying with the CDC’s mask-wearing requirements, may still qualify for the incentive. Other possible options include a waiver, regular testing and/or COVID-prevention training. Employers should consult with counsel to devise appropriate alternatives to vaccination.
  4. Provide notice of the availability of the reasonable alternative(s) to all participants, including contact information for obtaining the reasonable alternative and a statement that recommendations from the participant’s personal physician will be accommodated.
  5. Not exceed more than 30% of the total cost of employee-only coverage under the health plan.

Impact on ACA Affordability. Under the Affordable Care Act, employer-shared responsibility payments for plan coverage must be affordable. Premium discounts are treated as “not earned” in assessing the employee’s required contribution. Thus, the FAQs provide that premium reductions for vaccinated employees will not be considered when determining affordability under the ACA.  Premium surcharges, however, will be considered in determining affordability.

Takeaway. The bottom line is that employers considering health plan-related vaccine incentives or surcharges will need to comply with the requirements applicable to health-contingent wellness programs, as well as ensuring affordability.  Notably, these FAQs only address vaccine incentives and surcharges that impact the cost of coverage under group health plans.  They do not address vaccine incentives that may be offered independent of employer sponsored health plans.  The FAQs specifically disclaim any implications for compliance under other state or federal laws, such as the ADA and GINA, and refer to the EEOC’s guidance regarding vaccine incentives, which we’ve written about previously here.

We will continue to send out E-lerts on any additional, significant developments. You may also wish to check our continually-updated FAQs.