As employers consider implementing a vaccine mandate to encourage employees to get vaccinated against COVID-19, we have recently discussed the merits of imposing a “vaccine surcharge” on monthly health insurance premiums for those employees who remain unvaccinated.  There were unanswered questions about specific legal issues, but now the Department of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) issued FAQ guidance (the “FAQ”) to confirm that employers can incentivize employees by offering discounts on monthly insurance premiums for those who have been vaccinated for COVID-19 or impose insurance “surcharges” for those who choose not to be vaccinated (for reasons other than due to a medical condition.)  In making such clarifications, the FAQ also confirmed:

Insurance discounts/surcharges for COVID-19 vaccinations must adhere to existing Health Insurance Portability and Accountability Act (HIPAA) wellness guidelines for activity-based wellness programs.  Q/A-3 of the FAQ confirms that requiring an employee to be vaccinated for COVID-19 to receive the benefit of lower health insurance premiums does require the employee to perform or complete an activity related to a health factor and thus must satisfy the existing five criteria for activity-based wellness arrangements under HIPAA:

  • The program must be reasonably designed to promote health or prevent disease (the FAQ suggests helping schedule vaccination appointments and establishing a toll-free hotline to answer questions);
  • The program must provide a reasonable alternative standard to qualify for the discount on health insurance premiums (the FAQ suggests providing the discount if the individual can verify it would be unreasonably burdensome or medically inadvisable to be vaccinated for COVID-19 due to an existing medical condition);
  • The program must provide notice of the availability of a reasonable alternative standard (the FAQ suggests mandating compliance with the CDC’s mask guidelines for any employee who cannot otherwise be vaccinated because of an existing medical condition);
  • The incentive award (or penalty) cannot be more than 30% of the total cost of employee-only coverage when combined with all other wellness program awards or penalties; and
  • All employees must be offered the opportunity to qualify for the incentive at least once per year.

Note that the FAQ does not require an accommodation for religious or other non-medical reasons.  There is also no prohibition against allowing employees to meet the vaccination criteria at any time during the year.  However, the FAQ does advise employers considering adopting COVID-19 vaccination incentive programs to consult Section K of the Equal Employment Opportunity Commission’s What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws.

The premium discount/surcharge amount must be included in affordability calculations under the Affordable Care Act.  As we have discussed previously, Q/A-5 confirms that wellness incentives for COVID-19 vaccinations are considered the same as any other non-tobacco incentive.  To determine whether the employee’s monthly premium cost is “affordable” under Code Section 4980H(b), employers with over 50 full-time employees or full-time equivalents must disregard any premium discount amounts and include any vaccine surcharge amounts in the total cost of employee-only coverage.

Employers may not exclude employees from eligibility or coverage under a group health plan solely because of an employee’s COVID-19 vaccination status.  As an alternative to using a vaccine surcharge to incentivize employees, several employers have considered providing an exclusion from coverage under a group health plan for COVID-related claims for nonvaccinated employees.  Q/A-4 clarifies that such exclusionary practices would violate HIPAA nondiscrimination mandates and thus are not permissible.

Employers must provide 100 percent coverage of all COVID vaccination costs, including boosters.  The FAQ confirms that employers must provide coverage under their non-grandfathered group health plan for 100 percent of the cost of all vaccine shots (in compliance with Section 3203 of the CARES Act,) and Q/A-1 confirms this coverage mandate also includes the cost of any booster doses authorized or approved by the Food and Drug Administration or through an Emergency Use Authorization through the Centers for Disease Control.  But in a welcomed clarification, Q/A-1 and 2 indicate that because of confusion from prior guidance, the mandate for 100 percent coverage under a group health plan will not be enforced for periods before the release of this FAQ, October 4, 2021.

Conclusion:  Other questions remain, such as how the vaccine surcharge program should work during mid-year periods and whether it uniformly applies to other dependents (or other questions raised in our previous articles).  The FAQ clarifies many questions for employers considering implementing these arrangements just in time for the upcoming health plan renewal season.  For more information about imposing a vaccination surcharge on unvaccinated employees or other wellness program related questions, please contact the authors or the Jackson Lewis attorney with whom you regularly work.

Print:
EmailTweetLikeLinkedIn
Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with…

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, 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, Mr. Lazzarotti 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 – Mr. Lazzarotti 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 – Mr. Lazzarotti’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.

Mr. Lazzarotti 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.

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