Wellness Programs: COVID-19 Vaccination Incentives

Compliance, COVID-19, Employee Benefits

On October 4, 2021, the Department of Labor (DOL), Health and Human Services (HHS), and the Treasury released FAQ’s to provide clarity on whether an employer wellness program may provide incentives for receiving a COVID-19 vaccination.

A group health plan may offer participants a premium discount for receiving a COVID-19 vaccination within a HIPAA compliant wellness program. HIPAA requires that activity-only, health-contingent wellness programs comply with the following five requirements:

  • The program must give individuals the opportunity to qualify for a reward at least once per year.
  • The program must be reasonably designed to promote health and prevent disease (and is not a method for discrimination based upon a health factor).
  • The total reward must not exceed 30% of the cost of employee-only coverage under the plan. If dependents (such as spouses and/or dependent children) may participate in the wellness program, the reward must not exceed 30% of the cost of the coverage in which the employee and any dependents are enrolled. If the program is designed to prevent or reduce tobacco use, the financial incentive may increase to a maximum of 50% so long as the employer relies on an employee’s Affidavit of Non Tobacco Use. However, if the employer requires the individual be tested for nicotine, the maximum financial incentive remains at 30% as required by the EEOC.
  • The full reward must be available to all similarly situated individuals. The program must provide a reasonable alternative standard (or waiver of an otherwise applicable standard). An example included within the FAQ’s states that a reasonable alternative standard provides the same discount to individuals for whom it is unreasonably difficult due to a medical condition or medically inadvisable to obtain a COVID-19 vaccination if the individual attests to complying with the CDC’s mask guidelines for unvaccinated individuals. 
  • The wellness program materials must disclose in all materials the availability of reasonable alternative standards or the possibility of a waiver if applicable.

Reasonable Alternative Standard Language

The following language must be included within your wellness plan documentation.

Sample Notice of Alternative Standard Language: 

“Your health plan is committed to helping you achieve your best health status. Rewards for participating in a wellness program are available to all employees. If you think you might be unable to meet a standard for a reward under this wellness program, you may qualify for an opportunity to earn the same reward by different means.

Contact us at [insert contact information] and we will work with you (and, if you wish, with your doctor) to find a wellness program with the same reward that is right for you in light of your health status.”

Impact of Wellness Incentives on ACA Affordability

When determining whether coverage is affordable as defined by the Affordable Care Act, the wellness incentive provided for COVID-19 vaccination should not be considered when calculating the cost of employee-only coverage.

Key Takeaway

The FAQ’s address wellness plan incentives provided by employer group health insurance plans. They do not address incentives offered by employers as part of workplace policies.

Employers considering the adoption of COVID-19 vaccination programs should consult the EEOC’s publication on this topic, the newly released FAQs and employment counsel to ensure compliance with regulations that govern wellness incentives.

Please contact your M3 account management team for assistance in designing your wellness program and confirming its compliance with these requirements. 

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