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Locke Lord QuickStudy: What Employers Should Consider ‎Before Charging Higher Group Medical ‎Insurance Premiums for ‎Unvaccinated Employees ‎

Locke Lord LLP
September 2, 2021

On August 23, 2021, the U.S. Food and Drug Administration approved the first COVID-19 vaccine for the prevention of COVID-19 disease in individuals 16 years of age and older. The vaccine, which has been referred to as the Pfizer-BioNTech COVID-19 Vaccine and has been available only under an emergency use authorization up to now, will be marketed under the brand name Comirnaty.

Upon the release of this news, attention immediately turned to whether employers in the U.S. can legally impose vaccine mandates on their workforces. One type of mandate that has received national attention is the assessment of higher premiums for health plan coverage on unvaccinated plan participants.

Such a premium penalty must be viewed through the compliance lens that is applied to employee wellness programs, which, up to now, have been primarily used to create incentives for healthy behaviors that may reduce a plan’s exposure to high claims, such as smoking cessation, disease management, and improved body mass index.  

Incentives and penalties under employee wellness programs implicate multiple federal statutes that prohibit discrimination on account of health status. These programs must meet specific requirements that are incorporated into the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), through the Affordable Care Act (the “ACA”), ‎Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Americans with Disabilities Act (the “ADA”), and the Genetic Information ‎Nondiscrimination Act (“GINA”).

Before employers amend their group health plans that offer wellness programs to ‎provide a premium discount to vaccinated employees or to impose a premium surcharge on ‎unvaccinated employees, they must consider the following.   ‎

ACA and HIPAA

The ACA and HIPAA generally prohibit group health plans from charging similarly situated individuals different premiums or contributions or imposing different deductibles, copayment or other cost sharing requirements based on a health factor. However, an exception allows plans to offer health-contingent wellness programs, which are divided into two categories for compliance purposes:  activity-based and outcome-based.

While there has been no official guidance on the application of the wellness plan rules to a vaccine mandate, the rules applicable to an activity-based program would seem to be most appropriate given the  focus is solely on the act of receiving the vaccination and no consideration is given to whether the individual later contracts or transmits the COVID-19 virus. To satisfy the requirements applicable to this exception, the following requirements must be met:‎

  • ‎The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year.
  • Based on all facts and circumstances, the program must have a reasonable chance of improving the health of participating individuals, cannot be overly burdensome, and may not be a veiled attempt to discriminate based on a health factor.
  • The total reward (or penalty) for all the plan’s wellness programs that require ‎satisfaction of a standard related to a health factor is limited and must not exceed ‎‎30% of the cost of the coverage in which the applicable employee and any dependents are ‎enrolled.‎
  • ‎The program must allow a reasonable alternative standard (or waiver of the otherwise ‎applicable standard) for any employee for whom it is unreasonably difficult due to a medical ‎condition to get the COVID-19 vaccine or for whom it is medically inadvisable to get the ‎vaccine. For example, based on available guidance, an alternative standard could be requiring the employee to participate in an ‎educational program or providing a reasonable alternative standard that follows the recommendations of the individual’s personal physician with regard to medical appropriateness.‎
  • ‎The plan must disclose in all materials describing the terms of the program the ‎availability of a reasonable alternative standard (or the possibility of a waiver of the otherwise ‎applicable standard).‎


Employers who prefer not to have to fit their vaccine mandate within these parameters, could instead offer a vaccine incentive ‎ through an employee assistance program (“EAP”). In Frequently Asked Questions issued by the Departments of Labor, Health and Human Services, and the Treasury (the “Departments”) earlier this year, the Departments opined that such an EAP would be an “excepted ‎benefit” for purposes of the ACA and HIPAA, and therefore, not be subject to the wellness plan rules.  However, the EAP incentive ‎must not be tied to participation in the group health plan (i.e., it must be made available to all ‎employees). Rather than being tied to the otherwise applicable health plan premium, this EAP incentive could be designed as a set dollar amount incentive given to each employee ‎who provides proof of vaccination.‎

ADA and GINA

The ADA and GINA protect against the disclosure of an employee's disability and genetic-related information. However, both laws contain an exception, permitting the collection of such information as part of employer wellness plans, as long as an employee provides such information voluntarily. Whether wellness programs that incentivize or penalize certain behaviors are in fact “voluntary” has been the subject of much scrutiny over the years.

The Equal Employment Opportunity Commission (the “EEOC”), which has governing authority ‎over the ADA and GINA, previously issued regulations governing wellness programs. ‎However, these regulations were vacated by the U.S. District Court for the District of Columbia and subsequently withdrawn by the EEOC effective January 1, 2019 after AARP filed suit contending that the scope of the incentive (or penalty) that was permitted by the EEOC effectively rendered any employee's disclosure of ADA- and GINA-protected information involuntary. Subsequently, new ‎regulations that the EEOC proposed earlier this year were withdrawn by the Biden Administration.

Although, the ‎rules related to wellness plans’ compliance with the ADA and GINA are in flux, the ‎EEOC issued guidance on May 28, 2021 that addressed offering an incentive to employees to be vaccinated. Under this guidance, which does not specifically address wellness programs, an employer may offer an incentive to employees for voluntarily providing confirmation that they were vaccinated on their own at a pharmacy, public ‎health department, or other community health care provider. Requesting documentation showing that an employee received a COVID-19 vaccination is not a disability-related inquiry covered by the ADA. Further, if an employer asks ‎an employee to show documentation or other confirmation that the employee or a family ‎member has been vaccinated, it is not an unlawful request for genetic information under GINA. ‎Therefore, such requests should not run afoul of the ADA or GINA.‎

Different rules apply if an employer or its agent will be administering the vaccine to their ‎own employees (e.g., hosting a vaccination clinic). Under, the ADA, an employer may offer an ‎incentive (which includes both rewards and penalties), so long as the incentive is not so ‎substantial as to be coercive. “Because vaccinations require employees to answer pre-‎vaccination disability-related screening questions, a very large incentive could make employees ‎feel pressured to disclose protected medical information.” If the employer or its agent is ‎administering the vaccine, GINA permits an incentive be offered to the employee, but not to the ‎employee’s family members.‎

This EEOC guidance does not discuss the nature or scope of the incentives that may be offered for proof of vaccination.‎

Practical Considerations

It is important to note that the guidance applicable to employee wellness programs does not render other equal employment laws, such as Title VII of the Civil Rights Act of 1964, inapplicable. Employers should be mindful that because some individuals or demographic groups may face greater barriers to receiving a COVID-19 vaccination than others, some employees might be more likely to be negatively impacted by a vaccination requirement.

Disclosure is key. Plans must disclose the availability of a reasonable alternative standard to qualify for the reward (and, if applicable, the possibility of waiver of the otherwise applicable standard) in all plan materials describing the terms of a health-contingent wellness program. This disclosure must include contact information for obtaining the alternative and a statement that recommendations of an individual’s personal physician will be accommodated.

Consideration must be given to whether there are any other wellness program surcharges ‎or incentives applicable to the group health plan that must be considered along with the COVID-19 vaccine incentive in the aggregate to ‎satisfy the 30% limit.

Finally, the strategy of applying wellness program surcharges ‎or incentives applicable to the group health plan‎ as an alternative to vaccine mandates is only effective with respect to employees who are covered by that employer’s group health plan. This strategy will not have an impact on employees who are not enrolled in the employer’s plan.

This is a rapidly developing area of the law, and we anticipate that the federal government will release new guidance affecting employee wellness programs before the end of 2021.

Please see our COVID-19 resource page here. If you have any questions on the current wellness program guidance or would like assistance with developing a COVID-19 vaccination policy, please reach out to one of our team members for assistance.

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