The renewed spread of the COVID-19 virus and increased hospitalization rates in various parts of the country, coupled with lagging vaccination rates, have prompted many employers to consider various ways to encourage employees to receive vaccinations. In this article, we will focus specifically on programs that provide incentives in the form of group health plan premium discounts to vaccinated employees (or the ability to avoid a premium surcharge to vaccinated employees). For further information on alternative programs that encourage employees to receive COVID-19 vaccinations, see our write-up here.
Wellness Program Requirements
Although regulatory agencies have yet to address the issue, we believe incentives provided through/in connection with employer-sponsored group health plans are likely subject to the HIPAA wellness program requirements. Additionally, we believe the program would be considered a health-contingent program under HIPAA’s wellness rules because not all individuals can be vaccinated. To be HIPAA compliant, the program must therefore:
- Allow participants at least an annual opportunity to qualify for the reward;
- Have a maximum reward (or penalty) that does not exceed 30% of the total cost of coverage (the COBRA rate without adding the additional 2% administrative fee);
- A total reward (or penalty) of 50% of the total cost of coverage is permitted only when the standard is related to reducing tobacco use (COVID-19 vaccination incentives are limited to 30%);
- Be reasonably designed to promote health or prevent disease;
- Make the reward available to all similarly situated individuals and to individuals who qualify by satisfying a reasonable alternative standard (if it is unreasonably difficult due to a medical condition to get the vaccination or it is medically inadvisable to get the vaccination); and
- Disclose the availability of a reasonable alternative standard in all plan materials describing the details of the wellness plan.
Example 1 – Maximum Reward/Penalty (Multiple Incentives)
ABC Company offers a group health plan to employees with an employee-only rate (total cost/ COBRA rate without adding the additional 2% administrative fee) of $300 per month. ABC Company currently offers health plan participants the opportunity to reduce their monthly premium contribution by $50 if the employee receives a count under 200 on a total cholesterol test. ABC Company decides to offer health plan participants an additional opportunity to reduce their monthly premium contribution by $50 if the employee receives the COVID-19 vaccination.
Both standards ABC Company offers as a part of its wellness program are health-contingent standards. Therefore, the total premium incentive for ABC Company’s wellness program cannot exceed 30% of the total cost of coverage. ABC Company’s incentives are not compliant with the HIPAA wellness plan nondiscrimination safe harbor because $100 (the two incentives added together) is greater than 30% of $300 ($90).
Example 2 – Maximum Reward/Penalty
EFG Company offers a group health plan to employees with the following rate structure (total cost/ COBRA rate without adding the additional 2% administrative fee).
-Employee-only: $400 per month
-Family: $800 per month
EFG Company implements a $100 per month surcharge to health plan participants who are not vaccinated. Since EFG Company is not tying the surcharge to vaccination of spouses or dependents, it is limited to 30% of the employee-only rate for its maximum surcharge. EFG Company’s surcharge is compliant with the HIPAA wellness plan nondiscrimination safe harbor because $100 is less than 30% of $400 ($120).
Please be advised that any and all information, comments, analysis, and/or recommendations set forth above relative to the possible impact of COVID-19 on potential insurance coverage or other policy implications are intended solely for informational purposes and should not be relied upon as legal or medical advice. As an insurance broker, we have no authority to make coverage decisions as that ability rests solely with the issuing carrier. Therefore, all claims should be submitted to the carrier for evaluation. The positions expressed herein are opinions only and are not to be construed as any form of guarantee or warranty. Finally, given the extremely dynamic and rapidly evolving COVID-19 situation, comments above do not take into account any applicable pending or future legislation introduced with the intent to override, alter or amend current policy language.
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