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New FAQs Answer Questions on Premium Discounts for Vaccinated Employees

On October 4, 2021, the Departments of Labor, Health and Human Services, and the Treasury released a set of frequently asked questions focused primarily on whether group health plans could offer participants a premium discount for receiving a COVID-19 vaccination.

Can Group Health Plans Offer Premium Discounts to Vaccinated Employees?

FAQ 3 states that group health plans can offer vaccinated participants a premium discount so long as that discount complies with the final wellness program regulations. Therefore, the premium discount must comply with the five requirements for activity-only wellness programs. Those five requirements are

  • Giving eligible individuals an opportunity to qualify for the reward at least once per year
  • Limiting the reward, together with any other health-contingent wellness program rewards, to 30% or less of the total cost of employee-only coverage under the plan (or 50% for programs that include a tobacco cessation incentive).
  • Allowing all similarly situated individuals to receive the reward. For employees for whom it is unreasonably difficult to receive a vaccination due to a medical condition, a reasonable alternative standard must be made available.
  • Designing the wellness program to promote health or prevent disease, which means:
    • It must have a reasonable chance of improving the health of, or preventing disease in, participating individuals.
    • It must not be a ploy to discriminate based on a health factor.
    • It must not be overly burdensome.
    • It must not be a highly suspect method chosen to promote health or prevent disease.
  • Disclosing all plan materials that describe the terms of the program and the reasonable alternative standard.

One unknown was what would be considered a reasonable alternative standard. Fortunately, FAQ 3 provides one example. It states that a reasonable alternative standard can be when:

[t]he plan provides the same premium discount to individuals for whom it is unreasonably difficult due to a medical condition or medically inadvisable to obtain a COVID-19 vaccination if the individual attests to complying with the CDC’s mask guideline for unvaccinated individuals.

In addition to the information above, employers will still want to consider:

  • How the surcharge will work with other wellness incentives
  • Amount of surcharge
  • Notice procedures
  • Deadlines to get vaccinated and anticipating boosters
  • Midyear election changes
  • Documentation standards for vaccination status and exemptions
  • Reasonable alternative standards that differ from the example provided above

Can Group Health Plans Prevent Unvaccinated Employees From Participating?

While premium discounts are available through carefully crafted wellness plans, FAQ 4 makes it clear that group health plans cannot ban unvaccinated participants from participation in the plan. Benefits under the plan must still be uniformly available to similarly situated participants.
Applicable Large Employers who wish to implement premium discounts still need to be mindful of the ACA’s affordability requirements. FAQ 5 provides an example of a plan that offers a 25% discount for vaccinated participants. This discount does not count toward ACA affordability. However, if the plan implemented a 25% increase for unvaccinated participants, the surcharge will “not be disregarded.”

As always, don’t forget to also check state and local laws when considering COVID-19 vaccination mandates, premium discounts, and/or surcharges. If you have further questions, contact your OneDigital consultant and visit OneDigital’s Coronavirus Advisory Hub.