Want Employees to Immunize? You May Need to Incentivize! 

By Anne Hensley

As the pandemic continues, and with FDA approval of the vaccine likely imminent, employers are increasingly focused on how the vaccine can or should tie into their business policies. 

As of August 13, 70% of the adult population in the United States have received at least one dose of a COVID-19 vaccine. With the Delta variant surging and return-to-work efforts on shaky ground, employers are facing almost impossible decisions in a very difficult employment landscape.  According to the Labor Department, a record-setting four million workers resigned from their jobs in the month of April 2021. Couple that with COVID fatigue, staffing shortages and recalibrated return-to-work policies, and it has many employers getting serious about vaccination programs. 

But what is the best approach? Many employers are not yet ready to require vaccination for employees, particularly because of the factors discussed above. But at the same time, for many employers it’s not just about getting employees back into the office and maintaining their workforce; it’s also about limiting the potential future health care spend for COVID-related illnesses. 

Vaccinations are seen as a way to do just that. Could an expenditure now in the form of a vaccine incentive be worth the cost to avoid future health care spend on unvaccinated workers who are unfortunate enough to contract COVID-19? Perhaps it could help avoid increased premiums that might result from the rise in claims and hospitalization? Not to mention that long-haul COVID can now be a disability under certain laws, which is bound to impact overall COVID costs as well.  

Depending on how it is designed, a COVID vaccination incentive may very well be considered a wellness program. While wellness incentives are not a new concept to employers (think tobacco surcharges or incentives for those employees who get a physical each year), they can raise many compliance concerns. These concerns, highlighted below, will vary based on the specific wellness program design, and unfortunately a number of unanswered questions remain about vaccination policies and incentives. 

• ERISA: An employer paying for medical care in the form of a vaccine may create a group health plan (GHP) subject to the Employee Retirement Income Security Act of 1974 (ERISA). ERISA contains many requirements for GHPs, such as having a plan document, distributing a summary plan description and perhaps filing a Form 5500. However, employers have a relatively easy way to ensure ERISA compliance. They can integrate an ERISA-covered wellness program with their GHP (which would require, among other things, limiting to the program to those enrolled in that GHP). If the program coverage extends beyond the employer’s GPH, however, then the program must comply with ERISA on a stand-alone basis which can be much more difficult given the numerous ERISA requirements. 

• HIPAA: An incentivized vaccination program may be considered a wellness program subject to the nondiscrimination provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). HIPAA requirements for wellness programs vary depending on the program design. It divides workplace wellness programs into two general categories: participatory wellness plans and health-contingent wellness plans.  The more stringent requirements apply to the latter and certain incentivized vaccination programs may fall into that category. 

If considered a health-contingent program under HIPAA, the program must (1) comply with HIPAA’s dollar limits on incentives, and (2) offer a reasonable alternative standard (RAS) or alternative way to earn the incentive for certain participants who are unable to meet the initial standard required to earn the reward. In general, the HIPAA wellness program incentive dollar limit is tied to the cost of coverage under the employer’s medical plan. HIPAA limits wellness program incentives to 30% of the total cost of medical plan coverage (50% for tobacco programs). If an employer already has a wellness program in place, it may need to consider any incentives offered for the COVID-19 vaccine with the other plan requirements and incentives so as to not violate the incentive limit. 

• ADA: When a wellness program involves disability-related inquiries or requires employees to undergo medical examinations, it implicates the ADA. While the EEOC has confirmed that a vaccination is not in and of itself a medical exam, screening questions asked of employees prior to vaccination are very likely disability-related inquiries triggering an ADA analysis. If an employer hosts an onsite vaccination clinic or contracts with a third party vendor to perform the vaccinations on its behalf, then the ADA rules relating to wellness programs must be followed. 

ADA rules require that an incentive or surcharge be not so substantial that it renders the underlying action not ‘voluntary’ and that accommodations are provided to employees who are unable to receive the vaccine due to a disability or sincerely-held religious belief. Here is where this gets a bit tricky: If an employer simply asks for proof of vaccination to satisfy the incentive and no other information, it hasn’t made a disability-related inquiry under the ADA. If the program is considered a health-continent program under HIPAA and a RAS is offered, then it is likely that an employer will ask why an employee did not receive the vaccine as part of the RAS offering. The EEOC has indicated those inquiries would be considered a disability-related inquiry subject to the ADA and employers must comply with the ADA’s voluntary wellness program rules, which are currently in a state of flux. 

The above is just an initial list of potential compliance concerns. Other concerns may include the incentive’s impact on ACA affordability calculations, the Genetic Information Nondiscrimination Act and maintaining the privacy of any data collected as part of this program. 

Much like the COVID-19 virus itself, things are moving quickly and guidance is bound to change. Employers must weigh employee relations and any legal risks before choosing to incentivize employees to receive the vaccine. Will the incentive backfire? Will return-to-work plans stall because vaccinated employees will not want to return to the office to work among unvaccinated employees?  So much to consider! Employers should consult with their benefits advisors and legal counsel to determine the best course of action for their particular circumstances.