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Webinar Archive, Q&A and Washington Update: COVID-19 Vaccination Incentives and Surcharges – Compliance Considerations


The current surge in the COVID-19 pandemic and the availability of vaccines have led many employers to consider ways to incentivize their employees to get vaccinated. Large employers on the national stage have even announced plans to impose penalties on employees through either a vaccine mandate or surcharges on their group health plan. However, any employer that seeks to adopt one of these programs should first consult with employment law counsel to ensure they are compliant with applicable laws. 

Specifically, offering incentives or imposing surcharges that are tied to vaccination status brings up several compliance concerns that need to be addressed. Consider the following compliance obligations for common designs: 

  • Providing a reward or applying a surcharge on the group health plan cost based on vaccination status. This design requires employers to comply with HIPAA’s wellness plan rules applicable to health-contingent activity-only wellness programs, the Americans with Disabilities Act (ADA) and other rules such as the ACA’s employer mandate affordability rules. HIPAA limits the amount of the incentive, requires notice to employees and requires a reasonable alternative standard for those who cannot get the vaccine because of a medical reason.
  • Providing a cash benefit, prize or PTO to all employees based on vaccination status. The ADA rules apply. Under HIPAA, this option enters a grey area because there is an argument that offering this benefit to all employees could create a stand-alone wellness plan that would also be subject to the HIPAA wellness rules discussed above. If that argument is correct, this option would make it harder for employers to comply with other benefits-related laws (like ERISA and the ACA). Employers should also remember the obligation to tax the benefit.
  • Offering the vaccination through the employer/onsite or through an employer-appointed third party (with or without a reward). ADA rules will apply and require that the vaccination program not be “coercive.” There is also the concern that HIPAA wellness rules could apply in addition to HIPAA and ADA privacy concerns. Employers may also need to consider any liability issues that could be caused by adverse vaccine reactions.
  • Excluding COVID-19 treatment for unvaccinated participantsGuidance released on October 4, 2021 from HHS, IRS, and DOL (collectively, the Departments) confirms that HIPAA prohibits this practice, as it is discrimination based on a health factor. The guidance clarifies that while there is an exception to the prohibition on discrimination based on a health factor for compliant wellness programs, such exception is not applicable to denying eligibility for benefits or coverage based on a health factor (rather, it is available only for premium discounts and similar cost-sharing modifications).  
  • Mandating the vaccine. Under federal law, it appears that employers may mandate the vaccine for employees returning to the office. Employers must comply with the ADA by providing a reasonable accommodation to employees with a medical disability or sincerely held religious belief that prevents them from taking the vaccine. Laws in some states may restrict this practice. Employers looking to impose a vaccine mandate with employment consequences for refusing a vaccination will need to consult with employment law counsel. Please note that, on September 9, 2021, President Biden signed two executive orders that apply to employers with 100 or more employees and to federal contractors which requires employees to be vaccinated. (Additional guidance is anticipated on administering this requirement. Employment counsel is recommended for guidance on the implications of this requirement.)

Employers considering any of the above designs are best served by consulting with legal counsel. However, in an effort to provide additional education, NFP’s Benefits Compliance Team hosted a client-facing webinar on Wednesday, September 1, 2021. Please view the recording and slide deck from that webinar below. 

Questions and Answers from Take Your Best Shot: Compliance Considerations of COVID-19 Vaccine Incentives »

Recording

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NFP Corp. and its subsidiaries do not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.

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