Employers wanting to encourage employees to get vaccinated can phrase vaccination incentives as a wellness incentive program so that it is part of an outcome-based wellness program, which may include other wellness programs such as a smoking cessation incentive. There are limits following HIPAA and PPACA on the incentives that can be rewarded to employees under an outcome-based wellness program. What the regulations refer to as wellness programs with discounts can also be phrased as surcharges rather than discounts as long as the parameters on the incentives and other requirements for use of a wellness program are satisfied.
For smoking cessation, the maximum premium reduction is 50% of the applicable premium paid by the employee based on the statutory limit added by PPACA. Other wellness programs that do not require achievement of a particular health status – such as attaining a certain BMI or cholesterol level – can be considered an "activity based wellness program."
While there is no guidance specifically addressing a vaccinated status wellness program to date, it is important to review the HIPAA and PPACA regulations on wellness programs, which cover health status achievement-based wellness programs and "activity based wellness programs." A vaccine reward wellness program could be argued to be an "activity based wellness program," which is subject to a discount of no more than 30% of the applicable premium. So, an employer could offer employees a 50% reduction in premiums for achieving non-smoking status or a 30% reduction in premiums for proof of COVID-19 vaccination. The premium reduction is measured off of the total employer and employee premium for any level of coverage for the "activity based wellness program," so if an employer pays $220 toward employee-only coverage and the employee pays $180 per month for employee-only coverage, then the discount is calculated off of a $400 employee-only total premium. For a non-smoking reward, this means a $200 per month per employee-only coverage with a 50% non-smoking reward limit and a $120 reward (30% of $400) for vaccination per employee. Please note that for an activity based wellness program, there are a number of other additional requirements that must be satisfied, including but not limited to inclusion of specific content in all materials discussing the wellness or vaccine incentive plan.
For activity-based rewards, the incentive can be based on the total cost of the benefit package for the employee and any dependents receiving coverage, but they are limited to 30%. Each program and how it is structured must be reviewed on its own merit. It is important to remember that these programs can also be subject to EEOC regulation and other laws governing the employment relationship.
At this time, the EEOC has not issued new wellness program regulations. The EEOC's last regulations cast doubt on whether incentives can exceed 30% of the total premium for employee-only coverage, as they suggested this as too high of an incentive before a federal court struck the regulations. Employers will need to watch for any regulations that are issued and when those regulations become effective or applicable to employers. The EEOC's regulations are noteworthy, as violation of EEOC limits has the potential to impact damages in an employment law discrimination suit (ADA, Title VII), while violation of the IRS limits under PPACA and HIPAA result in a per-person penalty per day as a tax.
Employers need to assess the notice requirements applicable to changing health plan benefits before implementing such changes. Employers also need to consider other restrictions, such as collective bargaining agreement restrictions and labor and employment laws, before making any such changes, as it is all an interrelated web.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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