New Guidance Approves Wellness Program Incentives for COVID-19 Vaccination


All Employers


October 4, 2021


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The Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury jointly issued FAQs on how employers can offer incentives for COVID-19 vaccination, or conversely, health plan charges for failure to get vaccinated.

Under the Employee Retirement Income Security Act (ERISA), employers cannot discriminate against health plan participants, beneficiaries, and enrollees in eligibility, premiums, or contributions based on a health factor. However, premium discounts, rebates, or modification of cost-sharing requirements are permitted in wellness programs promoting health and disease prevention. The tri-agency guidance specifically says that employers may offer group health plan participants a premium discount for receiving the COVID-19 vaccine. This permission is contingent on the discount plan complying with the five criteria for activity-only wellness programs, including:

  • The plan is reasonably designed to promote health and prevent disease.
  • The plan provides a reasonable alternative standard to qualify for the benefit.
  • Employers must provide notice of availability of the reasonable alternative standard.
  • The plan reward must not exceed 30% of the total cost of employee-only coverage.
  • Eligible individuals must have the opportunity to qualify for the reward under the program at least once per year.

As part of the five criteria, the wellness plan must offer a reasonable alternative standard to qualify for the discount for those for whom it is “unreasonably difficult due to a medical condition or medically inadvisable to obtain the COVID-19 vaccination in order to qualify for the full award.” This may be an agreement to follow other COVID-19-related guidelines, like following the CDC’s mask guidelines for unvaccinated individuals. The FAQ even provides an example of an approved health plan discount for a vaccine incentive program.

The FAQs also specifically say that the employer must provide notice of the availability of the reasonable alternative standard under the wellness program. Wherever the wellness plan is discussed, the notice should state who employees should contact to obtain a reasonable alternative standard and that recommendations of an individual’s personal physician will be accommodated.

Although not the main focus of the FAQ, it indicates that wellness plan surcharges for refusing to get vaccinated are also permitted. For example, when discussing how to measure health coverage affordability under the Affordable Care Act (ACA), the FAQ addresses both wellness incentives and surcharges. Specifically, if an individual premium contribution under a COVID-19 vaccination wellness program was reduced, for example, by 25 percent, this reduction is disregarded for purposes of determining affordability; conversely, if a premium contribution is increased by 25%, for example, as a surcharge for an unvaccinated individual, the surcharge would not be disregarded in determining affordability.

Don’t forget about Title VII! Even though the FAQs primarily address medical accommodations, employer wellness programs must still take into account religious accommodations required by Title VII of the Civil Rights Act of 1964. The FAQ also states that employers considering the adoption of COVID-19 vaccination incentive programs should consult Section K of the Equal Employment Opportunity Commission’s What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws.

Action Items

  1. Review the FAQs here.
  2. Review and update wellness programs based on the current guidance.
  3. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

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