Joint Agencies Release Covid-19 Vaccine Related Guidance

At a Glance

• On October 4, 2021, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury released Frequently Asked Questions (FAQs) regarding implementation of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Affordable Care Act (ACA).
• The FAQs address cost-sharing requirements for Covid-19 preventative services, premium surcharges under a wellness program and the impact premium surcharges or discounts have on determining affordability for ACA employer mandate

Tri-Agency Covid-19 Vaccine Related Guidance

On October 4, 2021, the DOL, HHS, and the Treasury released five FAQs regarding cost-sharing requirements for Covid-19 preventative services, premium surcharges under a wellness program and the impact premium surcharges or discounts have on determining affordability for ACA employer mandate purposes.

The following are selected FAQs from the new guidance:

Q3: May a group health plan (or health insurance issuer offering coverage in connection with a group health plan) offer participants in the plan a premium discount for receiving a COVID-19 vaccination?

Yes, if the premium discount complies with the final wellness program regulations. A premium discount that requires an individual to perform or complete an activity related to a health factor, in this case obtaining a COVID-19 vaccination, to obtain a reward would be considered a wellness program that must comply with the five criteria for activity-only wellness programs described in paragraph (f)(3) of the final wellness program regulations.

Q4: May a group health plan or health insurance issuer condition eligibility for benefits or coverage for otherwise covered items or services to treat COVID-19 on participants, beneficiaries, or enrollees being vaccinated?

No. PHS Act section 2705, ERISA section 702, Code section 9802, and the Departments’ implementing regulations generally prohibit plans and issuers from discriminating against participants, beneficiaries, and enrollees in eligibility, premiums, or contributions based on a health factor. The Departments’ implementing regulations state that rules for eligibility include, among other things, rules related to benefits (including rules related to covered benefits and benefit restrictions). Benefits under the plan must be uniformly available to all similarly situated individuals and any restriction on benefits must apply uniformly to all similarly situated individuals and must not be directed at individuals based on a health factor.

Accordingly, plans and issuers may not discriminate in eligibility for benefits or coverage based on whether or not an individual obtains a COVID-19 vaccination. Furthermore, while there is an exception to the general prohibition on discrimination based on a health factor for wellness programs that meet federal standards, this exception is available only for premium discounts or rebates, or modifications of otherwise applicable cost-sharing mechanisms, and not for denying eligibility for benefits or coverage based on a health factor.

Q5: How are premium discounts and surcharges for receiving or not receiving the COVID-19 vaccination, respectively, treated for purposes of determining affordability of coverage with respect to the employer shared responsibility payment under section 4980H(b) of the Code?

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. Although premium incentives are permissible as part of a nondiscriminatory wellness program, premium incentives other than incentives relating exclusively to tobacco use, including wellness programs encouraging vaccinations for COVID-19, are treated as not earned when determining the employee’s required contribution for an offer of health coverage under 26 CFR 1.36B- 2(c)(3)(v)(A)(4).

Thus, for example, if the individual premium contribution under a COVID-19 vaccination wellness program was reduced by 25 percent, this reduction is disregarded for purposes of determining whether the offer of that coverage is affordable for purposes of assessing liability for the employer shared responsibility payment. Conversely, if an individual’s premium contribution for health coverage under a COVID-19 vaccination wellness program is increased by a 25 percent surcharge for a non-vaccinated individual, that surcharge would not be disregarded in assessing affordability.

Next Steps

Employers considering implementing a covid-19 vaccine surcharge should review the guidance to determine next steps. The guidance notes that FAQs address wellness program incentives provided by group health plans and health insurance issuers and do not address incentives offered by employers as part of workplace policies and unrelated to their group health plan.

Employers considering the adoption of COVID-19 vaccination programs that provide incentives 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.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.