Some, like Delta Airlines, are turning to higher premium costs, or a surcharge, for any group health plan participants who remain unvaccinated. This decision by Delta, taken once an FDA-approved vaccine came on the market, should by no means be interpreted as a full-throated endorsement of this action. In fact, it’s quite likely that Delta’s decision will be tested in the courts.
Challenges are likely to come in three areas: wellness positioning, surcharge amounts, and possible discrimination. Nevertheless, Delta’s decision has prompted some employers to consider doing something similar.
Here are issues employers need to consider if they decide to take similar action.
Treating group health plan participants differently based upon a health factor – such as whether a participant received a vaccine – is generally prohibited by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). There is, however, a narrow exception for arrangements that comply with the wellness program rules in the HIPAA regulations.
Under a compliant program, an employer may condition an incentive, offered in terms of the amount of employee premium contribution, on an employee’s participation in a wellness program. Many employers are already familiar with such a system as it pertains to smoking cessation programs.
And while Delta has been careful to position this medical premium surcharge as a wellness program initiative, additional guidance surrounding wellness programs, particularly from the EEOC, is unclear.
In May, the EEOC updated pandemic guidelines to clarify that employers may offer an incentive if employees can confirm they have been vaccinated on their own from a pharmacy, public health department, or other health care provider.
According to the same guidance, employers may even offer an incentive to employees for voluntarily receiving a vaccination administered by the employer or its agent, so long as the incentive is not “so substantial as to be coercive.”
While one can imagine how an employer might go about positioning a premium surcharge as an “incentive,” rather than a “penalty,” by simply flipping it around as a “premium discount” to those who are vaccinated, it’s far more unclear how an employer sets the incentive amount so as not to be “coercive.”
Prior to its May 2021 guidance, the EEOC had issued a notice of proposed rulemaking attempting to clarify its position on wellness program incentives. The proposed rule, however, was withdrawn by the incoming Biden administration.
The general rule, which would have permitted only de minimis incentives, came with an exception for health-contingent wellness programs that (i) are part of, or qualify as, group health plans and (ii) are subject to and comply with the applicable provisions on wellness program incentives under the Health Insurance Portability and Accountability Act (HIPAA) as amended by the Affordable Care Act (ACA).
Such programs would have been able to provide more than de minimis incentives, provided there were not greater than what is permitted under the ACA/HIPAA wellness rules (generally, incentives of up to 30 percent of the total cost of an employee’s health insurance premiums for self-only coverage, rising to 50 percent of individual-coverage costs for employees who participate in programs that prevent or reduce tobacco use).
This begs the question of just how plan sponsors would go about determining the premium difference. Unlike tobacco use, there may not be available actuarial data that determines the actual difference in cost to the plan between vaccinated and unvaccinated participants. (Delta Airlines cited that plan participants who were hospitalized due to COVID cost the plan more than $50,000.). Nevertheless, that’s the difference in cost between hospitalized and non-hospitalized plan participants, which is different than the plan cost between those who are vaccinated and those who aren’t.
Employers also need to keep in mind that these incentives are cumulative, meaning that adding a new incentive could cause their plan to exceed these, which would require reducing or modifying other incentives to allow for a vaccine-related incentive.
Finally, charging higher group health plan premiums to employees or other plan participants who medically cannot be vaccinated may constitute disability discrimination under the ADA.
Therefore, any consideration to add a premium surcharge should also come with careful planning around HIPAA non-discrimination, which states that rates cannot differ based on health factors, which include: health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability.
Furthermore, employers may need to make exceptions to a vaccination requirement and/or an incentive to accommodate for employees who don’t want to get vaccinated due to a strongly held religious belief. Treating those employees differently because of their lack of vaccination could potentially be discriminatory under Title VII of the Civil Rights Act.
The general consensus of the legal community at the moment, based on the legislation currently in place, seems to indicate that employer actions that 1) are not overly aggressive with the amount of a vaccine-related incentive (not surcharge) and 2) offer a reasonable alternative standard to individuals who cannot obtain a COVID vaccine due to a health factor, disability, or religious objection, may be permissible.
That said, between the legislation under EEOC, ADA, GINA, and HIPAA (wellness and non-discrimination), there are quite a few different rules that must be taken into consideration for employers that are considering either a surcharge or an incentive approach surrounding COVID vaccinations.
While the idea of charging higher premiums may appear to be an effective incentive to encourage unvaccinated employees to get their shots, it may be prudent for employers not to take this step until legal concerns over this practice are tested and/or resolved.
Employers may be safer mandating vaccinations, mask-wearing, and/or frequent testing of unvaccinated employees, rather than reducing or increasing medical premiums.
Contact us for more information on how JP Griffin Group works with employers to help them create compliant and effective employee benefits-related workforce policies.
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