Employers who sponsor group health plans will be interested in new guidance released last week by the DOL, IRS and HHS in the form of five COVID-19 related FAQs. Two of the FAQs address group health plan coverage requirements for COVID-19 vaccines, while the other FAQs provide long-awaited guidance on offering incentives for COVID-19 vaccines under group health plans and wellness programs.
Here are the key takeaways:
Group Health Plans Must Offer Free Coverage for COVID-19 Vaccines
- The guidance confirms that, as of January 5, 2021, all group health plans are required to cover, without cost-sharing, any COVID-19 vaccine authorized under an Emergency Use Authorization (EUA) or approved under a Biologics License Application (BLA) by the FDA immediately upon the vaccine becoming authorized or approved.
Group Health Plans May Not Deny Benefits to Unvaccinated Participants
- In light of some employers attempting to incent vaccinations and/or to lower group health plan expenses by limiting benefits to vaccinated individuals, the FAQs make clear that group health plans may not condition eligibility for benefits or coverage on participants being vaccinated.
Plans May Offer Vaccine Incentives but Must Follow Detailed Wellness Program Rules
- Employers may offer plan participants premium discounts for receiving a COVID-19 vaccination if the incentive complies with the final wellness program regulations. The premium discount may come in the form of a premium discount for vaccinated individuals or a premium surcharge for unvaccinated individuals. The premium discount will be considered an activity-only wellness program, which means the following requirements must be satisfied:
- Eligible participants must have the opportunity to qualify for the reward at least once per year [Smith Anderson Note: This should not be difficult and many plans may offer frequent or rolling opportunities to qualify as a way to truly incent vaccinations];
- The reward, together with the reward for other health-contingent wellness programs with respect to the group health plan, cannot exceed 30 percent of the total cost of employee-only coverage under the plan (employers will note the difference between this limit and the limit on rewards designed to prevent or reduce tobacco use, which is 50 percent) [Smith Anderson Note: This requirement could pose potential problems for employers who maintain robust wellness program incentives that are already pressing the 30 percent limit];
- The program must be reasonably designed to promote health or prevent disease [Smith Anderson Note: This seems easy to satisfy given wide medical support for vaccines];
- The full reward must be available to all similarly situated individuals, which requires allowing a waiver or a reasonable alternative standard for qualifying for the reward for individuals for whom it is unreasonably difficult due to a medical condition (or otherwise medically inadvisable) to get vaccinated (for example, in such a situation, the same discount could be provided to participants who: (1) are able to document that the vaccination is not medically advisable or unreasonably difficult due to a medical condition and (2) attest to complying with the CDC’s mask guidelines for unvaccinated individuals) [Smith Anderson Note: This is likely the most difficult requirement to navigate and employers should use caution when determining the level of documentation required to qualify for an alternative standard and in deciding the types of alternatives to permit]; and
- The availability of a reasonable alternative standard and/or waiver, if applicable, must be disclosed, along with contact information for obtaining a reasonable alternative standard and a statement that recommendations of a participant’s personal physician will be accommodated [Smith Anderson Note: This requirement should be relatively easy to meet.].
- Wellness incentives that relate to the receipt of COVID-19 vaccinations are treated as not earned for purposes of determining whether employer-sponsored health coverage is affordable. This means that, if an individual’s premium contribution for health coverage under a COVID-19 vaccination wellness program is increased by a 25 percent surcharge for a non-vaccinated individual, the surcharge would not be disregarded in assessing affordability. (Similarly, if the incentive consists of a 25 percent discount from regular premiums for vaccinated individuals, affordability must still be assessed based on the regular premium rates.)
- Importantly, a wellness program may also need to comply with other State or Federal law, such as the PHS Act, ERISA, the Internal Revenue Code, the ADA and GINA. This guidance does not address those requirements. The Equal Employment Opportunity Commission issued separate guidance earlier this year on COVID-19 vaccine incentives under Title I of the ADA and Title II of GINA, which is available here, Questions K.16 through K.21.
Employers Face a Range of Evolving Vaccination Rules
- This guidance comes as private-sector employers with 100 or more employees await an Emergency Temporary Standard ("ETS") from OSHA mandating that all such employers require full vaccination or weekly negative COVID-19 tests for unvaccinated workers (more on the ETS here). While larger private sector employers will want to begin preparations for complying with the new vaccination and/or testing requirements, they may find it both more efficient and more effective to rely on the ETS rather than attempting to drive vaccinations through modified wellness programs. On the other hand, small employers who are not subject to the ETS or the Affordable Care Act may find offering incentives through wellness programs helpful in driving vaccinations.
- It is also important to note that the new guidance only addresses vaccination incentives offered in the context of group health plans. Many employers have elected to offer various forms of incentives (e.g., cash bonuses, prizes, gift cards, additional PTO, etc.) outside of their group health plans in order to encourage vaccinations by employees. Employers remain free to continue to offer such vaccination incentives separate from their group health or wellness plans provided that the incentives comply with applicable laws.