On October 4, 2021, the Departments of Labor, Health and Human Services, and the Treasury (the Departments) jointly released an FAQ that confirms that employers can offer a premium discount for receiving a COVID-19 vaccination if it complies with the final HIPAA wellness program regulations.
Though the Equal Employment Opportunity Commission (EEOC) previously issued guidance on the application of the Americans with Disabilities Act (ADA) and the Genetic Information Non-Discrimination Act (GINA) to vaccine incentive programs, this is the first time the Departments have issued direct guidance on the application of the HIPAA wellness rules to vaccine incentives. We previously discussed how employers could implement premium discounts/surcharges for COVID-19 vaccination in compliance with HIPAA, ADA, and GINA in our prior blog.
COVID-19 Vaccination Premium Discounts and the HIPAA Non-Discrimination Rules
Generally, HIPAA prohibits group health plans from charging similarly situated individuals different premiums based on a health factor, except where an individual has met the standards of a compliant wellness program.
In the FAQs, the Departments state that a premium discount for obtaining a COVID-19 vaccination would be considered a health-contingent activity-only wellness program that must comply with the 5 criteria outlined under Section (f)(3) of the final wellness regulations. Under the 5 criteria, the wellness program:
- Must give individuals eligible for the program the opportunity to qualify for the reward under the program at least once per year;
- Must not have a reward that exceeds 30% of the total cost of employee-only coverage;
- Must be reasonably designed to promote health or prevent disease and it cannot be overly burdensome or a subterfuge for discriminating based on a health factor;
- Must be available to all similarly situated individuals and must provide a reasonable alternative standard (or waiver of the otherwise applicable standard) to qualify for the discount for any individual for whom it is unreasonably difficult due to a medical condition or it is medically inadvisable to obtain the vaccination. For example, the wellness program could offer individuals who had such a medical condition the ability to attest to following other COVID-19-related guidance; and
- The plan must provide a notice in all plan materials describing the availability of the reasonable alternative standard, including contact information for obtaining the reasonable alternative standard and a statement that recommendations of an individual’s personal physician will be accommodated.
The Departments provide the following example of a premium discount that would comply with the 5 criteria:
A group health plan offers a 25% premium discount on the cost of employee-only coverage to all participants who receive a COVID-19 vaccine. To help facilitate participants receiving the vaccination, the plan maintains a hotline to answer questions and schedule appointments. The plan offers the same premium discount to individuals for whom it is unreasonably difficult due to a medical condition or medically inadvisable to obtain a COVID-19 vaccine if individuals attest to complying with the CDC’s mask guidelines for unvaccinated individuals. The plan also provides a notice of availability of this alternative to all participants. Participants may qualify annually for this premium discount.
On the other hand, the Departments state that group health plans and health insurance issuers cannot condition eligibility for benefits or coverage for otherwise covered items or services to treat COVID-19 on the vaccination status of participants, beneficiaries, or enrollees. Benefits under the plan must be uniformly available to all similarly situated individuals and any restriction on benefits cannot be based on a health factor, including whether an individual obtains a COVID-19 vaccination.
COVID-19 Vaccination Premium Discounts and ACA Affordability
Applicable Large Employers “ALEs” (those with 50 or more full-time and full-time equivalent employees in the prior year) are required to offer affordable minimum value coverage to full-time employees and their dependents or face a potential penalty under the Affordable Care Act (ACA).
The Departments confirm that a premium discount for receiving the COVID-19 vaccination is treated as “not earned” for purposes of determining whether the employer-sponsored coverage meets ACA affordability. In other words, affordability must be determined assuming that each employee fails to obtain the vaccine and does not obtain the premium discount. Thus, employers should disregard any vaccine premium discount when calculating affordability for their plans.
Impact on Employers
The Department guidance further confirms that employers can provide a premium discount for employees who obtain a COVID-19 vaccination (and a premium surcharge on unvaccinated employees) if they are offered as a part of a HIPAA-compliant wellness program and it does not cause the plan to become “unaffordable” under the ACA. Employers should also consider compliance with federal anti-discrimination laws, such as the ADA and GINA, when implementing a premium discount, which we reviewed in our prior blog.
- DOL, HHS, and Treasury Guidance: HIPAA Non-Discrimination Rules, Wellness Programs, and Premium Discounts for COVID-19 Vaccination
- EEOC Guidance: What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws
- Sequoia Foreword: