Employers, You have Another Tool to Help you with Workforce Vaccine Mandates: Insurance Premium Discounts

Kollman & Saucier
Kollman & Saucier

As employees continue to return to offices, employers around the United States are looking for assistance in how to require and/or incentivize its employees to receive a COVID-19 vaccine.  Some of these initiatives come as employers prepare to confront the executive orders mandating vaccines on some workforces.

On September 9, 2021, President Biden announced his Path Out of the Pandemic: Covid-19 Action Plan that in part, set a requirement that all employees working on government contracts be fully vaccinated against COVID-19.  Additionally, through Department of Labor’s (DOL) Occupational Safety and Health Administration (OSHA), the Biden Administration has set a requirement that all employers with 100 or more employees have a fully vaccinated workforce or require those that are not vaccinated to submit to “at least weekly tests” before coming to work.

The federal contractor mandate is set to take effect December 8, 2021.  As Kollman & Saucier’s Vincent Jackson blogged about on September 27, 2021, the Safer Federal Workforce Task Force recently published guidance on the vaccine mandate.

OSHA has yet to release guidance on its requirement applicable to employers of 100 or more employees.  However, on October 4, 2021, the DOL, in conjunction with the Department of Health and Human Services and the Department of Treasury, released an updated FAQ regarding the administration of health plans to address specific considerations surrounding COVID-19.  In specific, whether employers may offer discounts to employees who have received a COVID-19 vaccine.

Under the guidance, employers may offer vaccinated employees a discount to a group health plan or health insurance coverage to participants in the form of a premium discount.  The discount falls under the existing “wellness program” discount, that is provided to insured employees, and is “designed to promote health or prevent disease.”  See 26 CF$ 54.9802-1(f)(3), 29 CFR 2590.702(f)(3), and 45 CF$ 146.121(f)(3).

There are certain requirements a premium discount must satisfy, falling under existing Health Insurance Portability and Accountability Act (HIPAA) wellness guidelines for activity-based wellness programs.  In summary, a discounted premium:

  • Must be reasonably designed to promote health or prevent disease.
  • There must be an available reasonable alternative standard to qualify for the discount under the wellness program that will not be overly burdensome (i.e. allowing adherence to CDC mask guidelines as an alternative to vaccination due to an individual’s medical condition or advice to refrain from vaccination).
  • The premium discount cannot exceed 30 percent of the total cost of employee-only coverage.
  • Employees must be offered the opportunity to qualify for the incentive at least once per year.

Large employers (50 or more employees) who do not have a wellness program and/or discount currently, are advised to also consider the Affordable Care Act’s (ACA) requirements when assessing the affordability of health plans.  Under the FAQ, the DOL has stated that “wellness incentives that relate to the receipt of COVID-19 vaccinations are treated as not earned for purposes of determining whether employer-sponsored health coverage is affordable.”  Moreover, if an individual’s contribution is increased due to an employee’s lack of vaccination, that surcharge would not be disregarded in assessing affordability. 

If you are interested in implementing an incentive to workers to encourage vaccines, please reach out to Kollman & Saucier.

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