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On Behalf of | Sep 24, 2021 | Unvaccinated Employees |


By executive order (EO) earlier this month the President directed the Department of Labor’s Occupational Safety and Health Administration (OSHA) to develop a rule that will require all employers with 100 or more employees to ensure their workforce is fully vaccinated or require any workers who remain unvaccinated to produce a negative test result on at least a weekly basis before coming to work (the vaccine mandate). OSHA plans to issue an Emergency Temporary Standard (ETS) to implement this mandate. No draft regulations have been released to date, and there is no indication of any compliance implementation date.

The EO directing OSHA to develop vaccine mandate rules and any subsequent legal challenges aside, many employers were already asking about imposing a premium differential between vaccinated and unvaccinated covered participants. Imposing such a premium differential seems permissible, but likely creates a group health plan wellness program, which triggers both HIPAA wellness program rules issued by HHS, and any ADA and GINA rules administered by the EEOC.

  • Such a program would likely be considered either a health-contingent “activity-only” program or a health contingent “outcome based” wellness program under HIPAA; thus, limiting the combined incentive to 30% of the cost of coverage based on the COBRA rate (up to 50% if a tobacco cessation incentive is involved)
  • A reasonable alternative must be offered annually to persons who cannot get vaccinated because it is medically inadvisable or, due to a sincerely held religious belief
  • Notice of the availability of the reasonable alternative must be placed in all materials substantially describing the wellness program
  • For ACA affordability purposes, when the “incentive” is structured as a premium surcharge, the employer must treat all full-time employees as if they failed to get vaccinated and were required to pay the increased premium amount when determining the affordability of coverage offered to full-time employees, even if they are vaccinated (IRS Notice 2015-87)

Some employers have asked about varying employer HSA contributions based on vaccination status as an alternative to a premium differential. This type of incentive may also be considered a wellness program, subject to the above rules. The HSA comparability rules will likely prevent this approach. Employer HSA contributions are subject to special nondiscrimination rules known as the comparability rules, which are very strict and rigid (i.e., even an employer match is not permitted if it results in differing amounts being contributed by the employer).

The comparability rules require employer contributions to be the same for all eligible employees within one of three permissible classes — FT employees working 30+ hours/week, PT employees working less than 30 hours/week and former employees, with variations for rate structure: e.g., single, single plus one, family. There is no class for unvaccinated employees. The comparability rules can be avoided by funneling employer HSA contributions through a section 125 plan subject, however, to satisfaction of applicable section 125 plan nondiscrimination rules.