CMS Issues FAQs Regarding COVID-19 Vaccine Premium Surcharges and Incentives
October 12, 2021
On October 4, 2021, the Departments of Health and Human Services, Treasury, and Labor (collectively, the departments) issued guidance in the form of FAQs clarifying HIPAA nondiscrimination rules applicable to certain vaccine-related wellness programs, as well as vaccine coverage. With the ongoing COVID-19 pandemic and the availability of vaccines, many employers are considering ways to incentivize their employees to get vaccinated. This recent guidance clarifies how HIPAA nondiscrimination rules impact wellness programs that offer vaccine-related premium surcharges and incentives.
In Q3 of the FAQs, the departments confirm that a group health plan is permitted to offer participants a premium discount for receiving a COVID-19 vaccination if the design of the program complies with federal wellness program rules. This includes HIPAA 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.
The HIPAA nondiscrimination rules require, among other things, that the program is reasonably designed to promote health or prevent disease, additionally:
- The reward (together with any other rewards for other health-contingent wellness programs) must not exceed 30% (or 50% for tobacco-related wellness programs) of the total cost of employee-only coverage.
- A reasonable alternative standard be available to those who show that it is unreasonably difficult to comply due to a medical condition (or medically inadvisable to satisfy the otherwise applicable standard).
- Disclosure of the reasonable alternative in all plan materials describing the wellness program.
Furthermore, HIPAA prohibits excluding COVID-19 treatment for unvaccinated participants, as doing so would constitute discrimination based on a health factor. Q4 of the FAQs clarifies that while there is an exception to the prohibition on discrimination based on a health factor for compliant wellness programs, such exception cannot be used to deny eligibility for benefits or coverage based on a health factor. The wellness plan exception applies only to premium discounts and similar cost-sharing modifications.
Further, Q5 of the FAQs explains the impact of any premium discount or surcharge related to COVID-19 vaccination status on ACA employer mandate affordability calculations. The guidance provides that since COVID-19 vaccination is not tied to tobacco use, the employer must use the higher premium amount for affordability purposes. In other words, the employer must treat all employees as if they are not vaccinated when calculating whether the offered coverage is affordable under the employer mandate.
Lastly, the guidance also confirms that plans and issuers must cover COVID-19 vaccines and their administration without cost-sharing once a vaccine is authorized under an emergency use authorization or approved under a Biologics License Application.
Employers seeking to adopt a wellness program providing incentives or surcharges related to COVID-19 vaccination status should be mindful of this guidance and consult with employment law counsel to ensure they are compliant with all applicable laws.
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