According to Forbes.com, more employers are considering imposing a premium surcharge on employees participating in the company’s health plan who are not vaccinated for COVID-19. Whether positioned as rewards or penalties, wellness program incentives have become vehicles of choice for encouraging behaviors believed to be healthy and reducing health plan costs. For years, tobacco users have faced health plan premium surcharges if they failed to cease using tobacco products (and if they also failed to comply with reasonable alternatives, such as completing a smoking cessation program). More COVID-19 “unvaccinated” employees may start facing similar surcharges if they choose to remain unvaccinated for COVID.

Implementing a COVID-19 premium surcharge wellness program to provide an incentive for more plan participants to get vaccinated comes with some compliance challenges. Those challenges depend largely on the design of the program and the administration of it. And, unfortunately, the guidance surrounding wellness programs, particularly from the Equal Employment Opportunity Commission (EEOC), remains less than clear. Check out a brief history of the EEOC’s position on wellness (prior to recent updated to its pandemic guidance).

Employers considering a health plan premium surcharge for plan participants who remain unvaccinated have some issues to consider in structuring the program, such as:

  • How much will the surcharge be?
  • How does a vaccination surcharge interact with other wellness incentives the employer offers?
  • Will the surcharge apply only with respect to employees who remain unvaccinated? What about spouses and dependents (assuming a COVID-19 vaccination is available)?
  • How long should plan participants have to get fully vaccinated?
  • What proof will be required to establish vaccination? There has been a rise in fake vaccination cards, and a warning from the FBI that making or buying such cards is a crime. What are the consequences under the plan for a participant who submits a fake card?
  • Is the vaccination requirement “participatory,” or is it “health-contingent”? If health contingent, and considered “activity only,” what reasonable alternative standard will be made available should vaccination be medically inadvisable for the participant?
  • What protections are in place for the handling of vaccination data and, in some cases, medical data supporting a reasonable alternative standard, all of which constitute protected health information under HIPAA?
  • Does the Americans with Disabilities Act apply even if vaccination does not constitute a disability-related inquiry or a medical examination? In other words, what reasonable accommodations need to be made available, if any?
  • As COVID-19 variants continue to emerge along with more talk of vaccine boosters, should the program also include boosters, if available?

On May 28, 2021, the EEOC updated its pandemic guidance to clarify that employers may offer employees an incentive if the confirm they have been vaccinated on their own from a pharmacy, public health department, or other health care provider. According to the same guidance, employers may even offer an incentive to employees for voluntarily receiving a vaccination administered by the employer or its agent, so long as the incentive (a reward or penalty) is not “so substantial as to be coercive.” However, the incentive may not extend to the employee’s family members receiving a vaccination administered by the employer or its agent as that could violate Title II of the Genetic Information Nondiscrimination Act, according to the EEOC.

Prior to its May 2021, guidance, the EEOC had issued a notice of proposed rulemaking (NPRM) attempting to clarify its position on wellness program. Withdrawn by the incoming Biden Administration, the NPRM is summarized here. Notably, the general rule that would have permitted only de minimis incentives, came with an exception for health-contingent wellness programs that (i) are part of, or qualify as, group health plans and (ii) are subject to and comply with the applicable provisions of the ACA/HIPAA wellness rule. Such programs would have been able to provide more than de minimis incentives, provided there were not greater than what is permitted under the ACA/HIPAA wellness rules.

Some employers are moving beyond incentives, including surcharges, to simply mandate COVID-19 vaccinations on the condition of employment. That approach comes with its own set of issues and risks. However, organizations choosing a health plan premium surcharge wellness program approach will want to consider these and other related issues carefully.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.