Summary
A set of Frequently Answered Questions addresses several issues of vital interest to employers in assessing the connection between COVID-19 vaccinations and their health plans.
The Upshot

• The FAQs confirm that the preventive care rules under the Affordable Care Act (ACA) require health plans to cover the full cost of vaccinations that have received an emergency use authorization from the CDC or have been approved by the Food and Drug Administration.
• Drawing on HIPAA’s nondiscrimination rules, the FAQs provide that, if an incentive program requires unvaccinated employees to contribute more toward the cost of health coverage than vaccinated employees, the program must meet the detailed requirements applicable to health-contingent wellness programs. They also provide that health plans may not exclude individuals from coverage based on their vaccination status.
• The FAQs describe the effect that health plan contribution incentives may have on the Affordable Care Act employer mandate, which establishes standards for the affordability of coverage. For purposes of these affordability standards, the cost of coverage to an employee will not take into account any wellness incentive that reduces premiums, but will take into account any surcharge that might apply.

The Bottom Line
Employers contemplating health plan incentives for those who remain unvaccinated will need to consider these restrictions.

Many employers have considered ways of encouraging employees to receive COVID-19 vaccinations, including incentives related to employee contributions toward the cost of health coverage. The Departments of Labor, the Treasury, and Health and Human Services have jointly issued a set of Frequently Answered Questions that addresses several issues of vital interest to employers in assessing the connection between COVID-19 vaccinations and their health plans.

First, the FAQs confirm that the preventive care rules under the Affordable Care Act (ACA) require health plans to cover the full cost of vaccinations that have received an emergency use authorization from the Centers for Disease Control or approval of a biologics license application from the Food and Drug Administration.

Second, the FAQs address HIPAA’s nondiscrimination rules, stating clearly that health plans may not exclude individuals based on their vaccination status. More significantly, the FAQs address HIPAA’s nondiscrimination rules governing wellness programs. They assert that incentives offered with regard to employee health plan contributions must satisfy the detailed requirements applicable to health-contingent wellness programs, treating the vaccination as an activity related to an individual’s health condition. This characterization of the program means that the incentive program must:

• Be available to all similarly situated individuals and that individuals must have the right to qualify for the incentive at least once per year.
• Be reasonably designed to promote health or prevent disease.
• Make available a reasonable alternative for those who cannot be vaccinated for medical reasons (for example, a plan may waive the vaccination requirement for those who are unable to receive the vaccine for medical reasons or require them to attest that they follow other COVID protocols, like mask-wearing).
• Provide notice of the availability of a reasonable alternative.
• Limit the value of the incentive, generally to no more than 30% of the total cost of employee-only coverage.

Finally, the FAQs describe the effect that health plan contribution incentives may have on the Affordable Care Act employer mandate, which establishes standards for the affordability of coverage. For purposes of these affordability standards, the cost of coverage to an employee will not take into account any wellness incentive that reduces premiums, but will take into account any surcharge that might apply. The only exception to this rule is for incentives related to tobacco use, which will not apply to a COVID-19 vaccination incentive.

Employers contemplating health plan incentives for those who remain unvaccinated will need to consider these restrictions. They may find that the employer mandate rules impose a more significant limit on the value of an incentive than the HIPAA nondiscrimination requirements.

As the FAQs observe, the new guidance does not speak to other rules that might apply. For example, the FAQs do not address how incentive programs will be treated under the Americans with Disabilities Act. By the same token, they do not apply (and their restrictions will not extend) to employment-based incentives that employers may offer outside of their health plans.