Calling it “a more-punitive approach toward getting its
workforce vaccinated against Covid-19,” the Wall Street
Journal recently reported that Delta Airlines
will require its unvaccinated workers to pay a $200 monthly health
insurance surcharge. Delta’s CEO is quoted as saying the
“additional charge will help to cover hospital stays that are
more likely for unvaccinated people infected with Covid-19,”
which he claimed “can cost the company as much as $50,000 a
person.” Delta later reported that “just within the
two weeks of the announcement, we’ve seen nearly 20%, or
one-fifth, of that 20,000 decide to get the vaccine.”
While efforts to impose workplace vaccine mandates are not new (and only heating up), Delta’s approach
based on an economic incentive has caused some to ask whether it is
permitted under applicable law. This post explores that
question.
Delta’s $200 Monthly Surcharge is Likely
Permissible under HIPAA and the
ACA.
First, some background. No Federal law requires that
employers provide group health plan coverage to all employees on
the same terms and conditions. Rather, employers have a good
deal of latitude to design their group health plan eligibility and
coverage terms and to dictate premium costs subject to certain
limitations. For example, the Health Insurance Portability
and Accountability Act of 1996 (HIPAA), as amended by the
Affordable Care Act (ACA), bars health plans from discriminating
(e.g. charging different premiums or contributions imposing
different deductibles, copayments or other cost sharing
requirements) against an individual based on the individual’s
“health factors,” which would likely include one’s
vaccination status.
To this general nondiscrimination rule, however, HIPAA
recognizes an exception for certain “wellness programs,”
whereby an employer can offer an award to the employee based on
their participation in the program. Final regulations issued
in 2013 under the Affordable Care Act (ACA) (the 2013 Final
Regulations) recognize two types of wellness programs provided in
connection with a group health plan that will satisfy the exception
to HIPAA’s nondiscrimination rules: (1) participatory wellness
programs; and (2) health-contingent wellness programs.
(1) Participatory wellness programs
Participatory wellness programs are generally available without
regard to an individual’s health status. Either no reward is
offered, or none of the conditions for obtaining a reward are based
on an individual satisfying a standard related to a health factor.
These programs comply with the nondiscrimination requirements
so long as the program is made available to all similarly situated
individuals.
(2) Health-contingent wellness
programs
Health-contingent wellness programs require participants to
satisfy a standard related to a health factor in order to obtain a
reward. There are two types of health-contingent wellness
programs: (i) activity-only; and (ii) outcome-based.
(i) Activity-only programs
Activity-only programs require an individual to perform or
complete an activity related to a health factor in order to obtain
a reward.
(ii) Outcome-based programs
Outcome-based programs require an individual to attain or
maintain a specific health outcome (such as not smoking or
attaining certain results on biometric screenings) in order to
obtain a reward.
In order to present as a viable health-contingent wellness
program (and therefore avoid a violation of the HIPAA/ACA
nondiscrimination rules), such a program must meet the following
five conditions:
- The program must give individuals eligible to participate the
opportunity to qualify for the reward at least once per year. - The total reward for all the plan’s wellness programs that
require satisfaction of a standard related to a health factor is
limited – generally, it must not exceed 30 percent (or 50 percent
for programs designed to prevent or reduce tobacco use) 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 percent (or 50
percent) of the cost of the coverage in which an employee and any
dependents are enrolled. For example, for an employee who
elected self-only coverage with a total monthly premium of $1,600
per month, the $200 surcharge would total 13% of the total premium
cost of the coverage, which is less than the 30% limit imposed by
the final ACA wellness plan regulation. - The program must be reasonably designed to promote health and
prevent disease. - The full reward must be available to all similarly-situated
individuals. This means the program must allow a reasonable
alternative standard (or waiver of the otherwise applicable
standard) (more on that below). - The plan must disclose in all materials describing the terms of
the program the availability of a reasonable alternative standard
(or the possibility of a waiver of the otherwise applicable
standard).
Different requirements apply for activity-only and outcome-based
programs when satisfying certain of these factors. With
respect to the alternative standard, under an activity-only
program, a reasonable alternative standard (or waiver of the
otherwise applicable standard) must be offered to any individual
for whom it is unreasonably difficult due to a medical condition to
satisfy the otherwise applicable standard, or for whom it is
medically inadvisable to attempt to satisfy the otherwise
applicable standard. The program can seek physician
verification with respect to a request for a reasonable alternative
standard, if the request is reasonable under the
circumstances.
Although regulatory guidance has yet to be issued, provided
Delta satisfies the above five factors, Delta’s $200 monthly
surcharge is likely a permissible activity-only, health-contingent
wellness program under HIPAA/ACA. That is: the program
requires an individual to become fully vaccinated (the
“activity”) for purposes relating the individual’s
health status (protection against severe illness or death because
of COVID-19), and in return, the vaccinated employee will not incur
the $200 monthly surcharge (the award).
We look forward to seeing how Delta designed its program to
satisfy the reasonable alternative standard. Does Delta’s
plan require physician verification of the reason for an
alternative along with attendance at an employer-paid educational
training course covering pandemic-control measures (handwashing,
distance, masking). Does it also require masking and
testing? Or, in the alternative, does Delta merely waive the
surcharge?
While we don’t know all of the particulars of Delta’s
program, it is in all likelihood permissible, at least under HIPAA
and the ACA.
Delta’s $200 Monthly Surcharge is Also Likely
Permissible Under Applicable Anti-Discrimination Laws If It Offers
Reasonable Accommodations and Part of a Voluntary Wellness
Program.
Most employers that sponsor group health plans are subject to
the Americans with Disabilities Act (ADA), which prohibits
employers from discriminating against individuals on the basis of
disability, including regarding employment compensation and other
terms, conditions, and privileges of employment, which includes
fringe benefits. They are also subject to other Federal,
state and local laws prohibiting discrimination, such as Title VII
of the Civil Rights Act, which, among other things, prohibits
discrimination based on religion. The ADA and Title VII (and
similar state and local anti-discrimination laws) also require
employers to make reasonable accommodations to disabled employees
and employees with certain religious objections and practices to
enable them to have equal access to fringe benefits, such as access
to, and participation in, wellness programs, unless doing so would
cause the employer undue hardship.
The “reasonable accommodation” standard under the ADA
and Title VII and the “reasonable alternative” standard
under the HIPAA wellness program requirements are two similar, but
ultimately different, concepts. As the 2013 Final Regulations
recognize, compliance with the HIPAA wellness program rule
requirements does not necessarily equate to compliance under any
other provision of the law, including the ADA and Title VII.
But presumably if an employer provides a reasonable alternative
that would allow participation in the wellness program, then it
should also meet the ADA and Title VII’s reasonable
accommodation standard. (A now-withdrawn ADA final rule from
the Equal Employment Opportunity Commission (EEOC) had said as
much.) For example, Delta would likely satisfy the ADA and
Title VII’s reasonable accommodation requirements by permitting
a surcharge waiver if the employee attends a pandemic control
educational course. Other accommodations could include onsite
masking or testing, or simply waiving the surcharge requirement
altogether for those that qualify for an accommodation.
The ADA also generally restricts employers from asking employees
to provide health information or to submit to a medical exam.
As with the HIPAA/ACA nondiscrimination rules, an exception applies
here, too – employers may inquire about an employee’s health or
conduct medical examinations that are part of a voluntary
employee health program, including wellness programs.
Some may point to a recent EEOC pandemic-related guidance
document in which the EEOC notes that inquiring about an
employee’s vaccination status is not a disability
related inquiry under the ADA when the inquiry pertains to a
vaccination administered by a third party (e.g. the employee’s
health care provider, pharmacy, etc.) and not by the
employer or its agent. And therefore, the voluntary nature of
the wellness program is irrelevant because the ADA does not
apply. But we urge employers to exhibit caution here despite
the fact that this observation would indeed be correct. And
that is because if an employer requires an employee to identify
their need for a “reasonable alternative” under their
wellness program to satisfy HIPAA rules – a/k/a the
employer is asking the “why” behind the employee’s
unvaccinated status to make an exception to its program’s
requirements – then the employer has now potentially asked a
disability-related question and we fall back into ADA
territory.
The EEOC has, over the last few years, struggled to establish
rules governing the meaning of “voluntary” under the ADA
(and another discrimination law, the Genetic Information
Nondiscrimination Act (GINA), which prohibits discrimination based
on genetic information with respect to health insurance and
employment). A Federal district court invalidated a 2016
final rule defining the meaning of
“voluntary.” Proposed Trump-era rules issued in
January 2021 under the ADA and GINA tried again, this time by
stating that de minimis incentives could be offered to
meet the definition of voluntary for a health-contingent wellness
program and noted that HIPAA’s 30% reward rule (discussed
above) would meet that standard. The Biden Administration,
however, withdrew these proposed rules. So the EEOC’s
current position on health-contingent wellness programs is in flux,
and its most recent view can be found in the aforementioned EEOC
pandemic guidance Q&A document in which it states that to be
voluntary, “any incentive (which includes both rewards and
penalties)” must not be “so substantial as to be
coercive.”
With this in mind, questions remain over whether Delta’s
program would comply with the ADA. Would the Biden
Administration conclude that a $200 monthly surcharge ($2,400
annually) is not “so substantial as to be coercive,” and
therefore Delta’s program is voluntary? We would think
given the Biden Administration’s push for vaccination, it would
endorse this program, but we eagerly await further guidance
confirming or disabusing us of this view. Further, regardless
of the Administration’s view, would a court apply the
EEOC’s current standard similar or the “de
minimis” standard from the now withdrawn regulation, or
some other standard in analyzing the surcharge?
Questions also remain over whether a wellness program will be
considered “voluntary” where an employer waives the
surcharge if the employee agrees to COVID-19 testing, but
where the employer requires the employee to pay for such
testing. Leaving aside any potential wage and hour issues,
vaccination may seem like the only viable option for employees in
that case, which could impact a voluntary finding.
Takeaways
For all the reasons cited above, it is apparent that the laws
governing COVID-related group health plan surcharges are less than
clear. Hopefully, further clarifying guidance is on the way
that will allow other employers desiring to utilize a surcharge or
other incentive to shape and implement their plans
accordingly.
Until such guidance is issued, we recommend employers take a
measured approach when designing and implementing any plans to
ensure any incentives offered could not be viewed as coercive.
Additionally, employers should ensure that such plans provide
for medical and religious-based exemptions. Finally, we
recommend that employers with unionized employees consider
bargaining over this issue.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
