In October 2020, CMS Released its Transparency in Coverage Final Rules (the “TiC Final Rules”) which require non-grandfathered group health plans and carriers offering health insurance in the individual and group markets to: (1) make available to the public three separate machine-readable files (for in-network rates, out-of-network allowed amounts, and prescription drugs) that include detailed pricing information for each available coverage option, and (2) release cost-sharing information to participants, including the underlying negotiated rates, for all covered health care items and services, including prescription drugs, through an internet-based self-service tool and in paper form (upon request).
The TiC Final Rules were intended to be rolled out over a three-year period beginning January 1, 2022; however, in August 2021, the DOL released FAQs that delay implementation until July 2022 or later.
In addition to the deadline extensions for the TiC Final Rules, certain other new transparency requirements authorized under the Consolidated Appropriations Act, 2021 (CAA) that were scheduled to become effective later this year are delayed pursuant to the FAQs. The transparency requirements of the TiC Final Rules and the CAA, along with the deadline extensions, are summarized in more detail below. Additionally, the TiC Final Rules are currently in the process of being litigated in federal district court.
Transparency in Coverage Final Rules
In October 2020, CMS released the TiC Final Rules, which require group health plans and health insurance carriers (“carriers”) to publicly post standard charge information and negotiated rates for common shoppable items and services in an easy-to-understand, consumer-friendly, and machine-readable format. Regulations were also ordered to be implemented for hospitals to post (and regularly update) standard charge information for services, supplies, or fees billed to patients, or provided by hospital employees. The hospital requirements were effective beginning January 1, 2021, while the TiC Final Rules are effective for plan years beginning on or after January 1, 2022, except as delayed below. The TiC Final Rules are summarized below, followed by the extensions.
Machine Readable Files
Under the TiC Final Rules, for plan years beginning on or after January 1, 2022, most non-grandfathered group health plans and insurance carriers offering non-grandfathered health insurance coverage in the individual or group markets are required to make available to the public, including stakeholders such as consumers, researchers, employers, and third-party developers, three separate machine-readable files that include detailed pricing information. The information must be available on an internet website. Specifically, three separate machine-readable files for “each coverage option offered by a group health plan or health insurance issuer” must be created – one for in-network rates, one for out-of-network allowed amounts, and one for prescription drugs. The information required to be included in each machine-readable file for all covered items and services are described in the regulations.
The machine-readable files must be updated monthly (and clearly indicate the date the file was last updated) and must be available in a form and manner specified in any guidance issued by the IRS, DOL, or CMS. Further they must be publicly available and accessible to any person free of charge and without conditions, such as establishment of a user account, password, or other credentials, or submission of personally identifiable information to access the file.
An aggregated allowed amount for more than one plan or insurance policy or contract is permitted for out-of-network (“OON”) allowed amounts where the group health plan or carrier contracts with a carrier, service provider, or other party to provide the information. This may be hosted on a third-party website or posted by a third party; however, the group health plan or carrier must provide a link to the site hosting or post the information on its own website.
Release of Cost-Sharing Information to Participants and Beneficiaries
Additionally, for plan or policy years beginning on or after January 1, 2023, upon request, a plan is required to provide to participants and beneficiaries enrolled in the group health plan, cost sharing information for the 500 covered items and services identified in Table 1 of the TiC Final Rules (all other covered items and services must be provided for plan or policy years beginning on or after January 1, 2024) in a format described in the regulation.
Plans and carriers must provide the required information on an internet-based self-service tool that meets certain requirements, or via hardcopy/paper format upon request. There can be no cost for the information, and the information must be provided in plain language. The plan or issuer may limit the number of providers to no fewer than 20 providers per request and meet certain timing, content, and delivery requirements.
Fully insured group health plans can contract (in writing) with the carrier to provide any of the above-described information (machine-readable files, paper files, or internet information to participants or beneficiaries) on behalf of the plan. In those circumstances the issuer, not the group health plan, is responsible for compliance and any compliance failures. Self-funded plans can contract with a third-party administrator or other party to assist the plan with compliance; however, the self-funded group health plan ultimately remains responsible for compliance and any compliance failures on the part of the TPA or other party. Additionally, group health plans and health insurance carriers are required to comply with any state or federal privacy laws when complying with any of the above-described disclosure requirements.
Deadline Delays for Transparency in Coverage Rules
With many of the deadlines under the TiC Final Rules as well as other transparency requirements under the CAA fast approaching, the DOL released FAQ #49, extending certain deadlines.
Machine Readable Files
The deadline for machine readable files for in-network rates and OON allowed amounts and billed charges for covered items and services is extended from January 1, 2022 to July 1, 2022. The agencies intend to release more guidance prior to the deadline.
Further, the deadline to provide machine readable files for prescription drugs is delayed indefinitely. This requirement has clear overlap with transparency requirements under the Consolidated Appropriations Act, 2021. Accordingly, the DOL intends to consider whether prescription drug machine-readable file requirements are appropriate and will address this through notice-and-comment rulemaking.
States are required to enforce the machine-readable file requirements for carriers, so the DOL encourages states to take a similar approach and delay enforcement of the machine-readable file requirements for in-network rates, OON allowed amounts, and prescription drugs using the same timeframes.
Release of Cost-Sharing Information to Beneficiaries and Participants
The CAA, 2021, which was passed after the TiC Final Rules, includes largely duplicative requirements for group health plans and insurance carriers to provide cost-sharing information to participant and beneficiaries, and further requires price information to be provided via telephone upon request (in addition to online or paper requirements). To address the duplicative nature of these requirements, the agencies intend to propose rulemaking to require the same pricing information available through the online tool (or by paper upon request) be provided by telephone (upon request) as well. Further, the agencies will defer enforcement of any CAA requirements under the CAA until plan years beginning on or after January 1, 2023 (which is consistent with the first compliance deadline under the TiC Final Rules).
States are required to enforce these requirements for carriers, so the DOL encourages states to take a similar approach and delay enforcement of these requirements until plan years beginning on or after January 1, 2023.
Other Transparency-Related Deadlines Extended
Pharmacy Benefits and Drug Costs Reporting Under the CAA
The CAA requires group health plans or carriers to begin reporting detailed information regarding the plan and its coverage of certain prescription drugs (the 50 brand prescription drugs most frequently dispensed and the 50 prescription drugs with the greatest increase in plan expenditures over the plan year) as well as other plan information beginning on December 27, 2021, and each June 1st thereafter. The DOL recognizes the significant operational challenges plans and carriers may encounter complying with these reporting requirements by the applicable statutory deadline and, therefore, the DOL has deferred enforcement of the first and second reporting deadlines by one year. Therefore, plans will be required to file their first report on December 27, 2022, and each June 1st thereafter. The agencies encourage plans and carriers to amend contracts and put processes and procedures in place to ensure they can meet the initial December 27, 2022 deadline.
Advanced Explanation of Benefits (Advanced EOBs)
Effective for plan years beginning on or after January 1, 2022, upon receiving a good faith estimate regarding certain items or services, the CAA requires group health plans and carriers to send (via mail or electronically) a participant, beneficiary, or enrollee an Advanced EOB in clear and understandable language that includes certain specified information, including (1) the network status of the provider or facility, (2) the contracted rate (for participating providers or facilities) or a description of how a participant can obtain information about participating providers or facilities, (3) good faith estimate received from the provider or facility, (4) a good faith estimate of the participant’s cost-sharing and the plan’s responsibility for paying for the items or services, and (5) information regarding any medical management techniques that apply to the items or services. The Advanced EOB must clearly state it is only an estimate based on the items or services reasonably expected to be provided at the time of scheduling/requesting the item or service and is subject to change based on the items or services actually provided.
Due to the complexity of these requirements, the technological requirements involved, and the lack of agency guidance on these requirements, the DOL intends to engage in notice-and-comment rulemaking in the future to implement these requirements, including establishing appropriate data transfer standards. Accordingly, the DOL will defer enforcement, but did not specify a specific compliance date.
HHS intends to explore whether interim solutions are feasible for insured consumers and encourages states to delay enforcement of these requirements for applicable plans.
Other Transparency-Related Guidance Addressed in the FAQs
In other instances, the DOLs FAQs do not extend the deadline to comply with certain transparency requirements under the CAA; they provide certain enforcement guidance or clarification. This information is summarized below:
Insurance ID Cards
Effective for plan years beginning on or after January 1, 2022, the CAA requires plans and carriers to include on any physical or electronic plan or insurance identification card issued to participants, beneficiaries, or enrollees any applicable deductibles, out-of-pocket maximum limitations, and a telephone number and website address for consumers seeking consumer assistance. The information is required to be provided in clear writing.
The agencies do not intend to issue rules related to this requirement before January 1, 2022, and, therefore, plans and carriers must begin to comply with these requirements by that date. Plans and carriers are expected to determine how to represent plan and coverage designs in a compliant way on the ID cards using a good faith, reasonable interpretation of the law. Reasonable methods may be varied, and agencies will consider whether the approach used by the plan or issuer is reasonably designed and implemented to provide the required information to all participants, beneficiaries, and enrollees. Agencies will consider whether the specific data elements are included or, if not, whether it is made available through other information that is provided on the ID card and the mode by which any information absent from the card is made available, when required information is made available. Per the agencies, a compliant ID card could include the applicable major medical deductible and applicable out-of-pocket maximum, as well as a telephone number and website address for individuals to seek consumer assistance and access additional applicable deductibles and maximum out-of-pocket limits, the card could include a QR code or link (if the card is digital) to access additional deductible out-of-pocket maximum limits for the plan.
Pursuant to the CAA, since December 27, 2020, providers, networks or associations of providers, TPAs, or other service providers have been prohibited from either directly or indirectly restricting (by agreement) plans or carriers from (1) providing provider-specific cost or quality of care information or data to referring providers, the plan sponsor, participants, beneficiaries, or enrollees, or individuals eligible to become participants, beneficiaries, or enrollees of the plan or coverage; (2) electronically accessing de-identified claims and encounter data for each participant, beneficiary, or enrollee; and (3) sharing such information (in compliance with any privacy regulations). Further, plans and carriers are required to submit an annual report to the DOL, HHS, or IRS confirming compliance with these requirements.
The DOL believes these requirements are self-implementing and does not expect to issue any regulations on these requirements, though they will release guidance regarding how to submit attestations of compliance beginning in 2022. Therefore, unless and until any guidance is released, plans and carriers must comply with these requirements using a good faith, reasonable interpretation of the statute.
The CAA established provider directory standards, which require plans or carriers to establish a process for updating and verifying the accuracy of information in their provider directories, and establish a protocol for responding to telephone calls and electronic communications from participants, beneficiaries, or enrollees about a provider’s network participation status, and must honor any incorrect or inaccurate information provided to the participant, beneficiary, or enrollee about the provider’s network participation status.
While the DOL intends to initiate rulemaking on these requirements sometime in 2022, the deadline for compliance is not extended. Plans and carriers must comply with these requirements, and will not be considered to be out of compliance if, (1) beginning on or after January 1, 2022, in situations where a participant, beneficiary, or enrollee receives items and services from a non-participating provider and the individual was provided inaccurate information by the plan or issuer via the provider directory or response protocol indicating the provider was participating, and (2) the plan or issuer imposes only a cost-sharing amount that is not greater than the cost-sharing amount that would be imposed for items and services furnished by a participating provider, and counts those cost-sharing amounts toward any deductible or out-of-pocket maximum. Once implemented, the final rules will have a prospective effective date.
Balance Billing Disclosure Requirements
The balance billing disclosure requirements of the No Surprises Act are effective for plan years beginning on or after January 1, 2022. In the preamble to its interim final rules addressing balance billing, the DOL indicated that it intends to address balance billing disclosure requirements in more detail in the future; however, that may not occur before January 1, 2022. Accordingly, plans and carriers must comply with these requirements using a good faith, reasonable interpretation of the statute for plan years beginning on or after January 1, 2022. Once implemented, the final rules will have a prospective effective date. In the meantime, the DOL issued a model disclosure notice that may be used to satisfy the disclosure requirements regarding the balance billing protections.
Continuity of Care Requirements
The CAA requires group health plans or carriers to establish certain continuity of care protections when there are changes in provider or facility networks under the plan effective for plan years beginning on or after January 1, 2022. While the DOL intends to initiate rulemaking on these requirements sometime in 2022, the deadline for compliance is not extended. Plans and carriers must comply with these requirements using a good faith, reasonable interpretation of the statute for plan years beginning on or after January 1, 2022. Once implemented, the final rules will have a prospective effective date.
What’s Next for Employers?
While employers have been given an extension for complying with many of the provisions of the Transparency in Coverage regulations and transparency-related provisions of the CAA, plans should follow the DOL’s suggestion and ensure they update any contractual provisions with their TPAs or carriers and identify which parties are responsible for preparing any machine-readable files or other deliverables under these new statutory and regulatory requirements. Group health plan sponsors, including sponsors of grandfathered health plans with regard to the No Surprises Act and other applicable requirements, should continue to monitor additional rulemaking or guidance issued by the agencies related to any transparency provisions.
Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable.
Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before Oct. 15, 2021— the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use.
This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and do not enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Although there are no specific penalties associated with this notice requirement, failing to provide the notice may be detrimental to employees.
Employers should confirm whether their health plans’ prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices before Oct. 15, 2021. To make the process easier, employers often include Medicare Part D notices in open enrollment packets they send out prior to Oct. 15.
A group health plan’s prescription drug coverage is considered creditable if its actuarial value equals or exceeds the actuarial value of standard Medicare Part D prescription drug coverage. In general, this actuarial determination measures whether the expected amount of paid claims under the group health plan’s prescription drug coverage is at least as much as the expected amount of paid claims under the Medicare Part D prescription drug benefit. For plans that have multiple benefit options (for example, PPO, HDHP and HMO), the creditable coverage test must be applied separately for each benefit option.
CMS has provided two model notices for employers to use:
- A Model Creditable Coverage Disclosure Notice for when the health plan’s prescription drug coverage is creditable; and
- A Model Non-creditable Coverage Disclosure Notice for when the health plan’s prescription drug coverage is not creditable.
These model notices are also available in Spanish on CMS’website.
Employers are not required to use the model notices from CMS. However, if the model language is not used, a plan sponsor’s notices must include certain information, including a disclosure about whether the plan’s coverage is creditable and explanations of the meaning of creditable coverage and why creditable coverage is important.
The creditable coverage disclosure notice must be provided to Medicare Part D-eligible individuals who are covered by, or who apply for, the health planâ€™s prescription drug coverage. An individual is eligible for Medicare Part D if he or she:
- Is entitled to Medicare Part A or is enrolled in Medicare Part B; and
- Lives in the service area of a Medicare Part D plan.
In general, an individual becomes entitled to Medicare Part A when he or she actually has Part A coverage, and not simply when he or she is first eligible. Medicare Part D-eligible individuals may include active employees, disabled employees, COBRA participants and retirees, as well as their covered spouses and dependents.
As a practical matter, group health plan sponsors often provide the creditable coverage disclosure notices to all plan participants.
Timing of Notices
At a minimum, creditable coverage disclosure notices must be provided at the following times:
If the creditable coverage disclosure notice is provided to all plan participants annually before Oct. 15 of each year, items (1) and (2) above will be satisfied. “Prior to,” as used above, means the individual must have been provided with the notice within the past 12 months. In addition to providing the notice each year before Oct. 15, plan sponsors should consider including the notice in plan enrollment materials for new hires.
Method of Delivering Notices
Plan sponsors have flexibility in how they must provide their creditable coverage disclosure notices. The disclosure notices can be provided separately, or if certain conditions are met, they can be provided with other plan participant materials, like annual open enrollment materials. The notices can also be sent electronically in some instances.
As a general rule, a single disclosure notice may be provided to the covered Medicare beneficiary and all of his or her Medicare Part D-eligible dependents covered under the same plan. However, if it is known that any spouse or dependent who is eligible for Medicare Part D lives at a different address than where the participant materials were mailed, a separate notice must be provided to the Medicare-eligible spouse or dependent residing at a different address.
Creditable coverage disclosure notices may be sent electronically under certain circumstances. CMS has issued guidance indicating that health plan sponsors may use the electronic disclosure standards under Department of Labor (DOL) regulations in order to send the creditable coverage disclosure notices electronically. According to CMS, these regulations allow a plan sponsor to provide a creditable coverage disclosure notice electronically to plan participants who have the ability to access electronic documents at their regular place of work, if they have access to the sponsor’s electronic information system on a daily basis as part of their work duties.
The DOL’s regulations for electronic delivery require that:
- The plan administrator uses appropriate and reasonable means to ensure that the system for furnishing documents results in actual receipt of transmitted information;
- Notice is provided to each recipient, at the time the electronic document is furnished, of the significance of the document; and
- A paper version of the document is available on request.
Also, if a plan sponsor uses electronic delivery, the sponsor must inform the plan participant that he or she is responsible for providing a copy of the electronic disclosure to their Medicare-eligible dependents covered under the group health plan.
In addition, the guidance from CMS indicates that a plan sponsor may provide a disclosure notice electronically to retirees if the Medicare-eligible individual has indicated to the sponsor that he or she has adequate access to electronic information. According to CMS, before individuals agree to receive their information via electronic means, they must be informed of their right to obtain a paper version, how to withdraw their consent and update address information, and any hardware or software requirements to access and retain the creditable coverage disclosure notice.
If the individual consents to an electronic transfer of the notice, a valid email address must be provided to the plan sponsor and the consent from the individual must be submitted electronically to the plan sponsor. According to CMS, this ensures the individualâ€™s ability to access the information and that the system for furnishing these documents results in actual receipt. In addition to having the disclosure notice sent to the individual’s email address, the notice (except for personalized notices) must be posted on the plan sponsor’s website, if applicable, with a link on the sponsor’s homepage to the disclosure notice.
Disclosure to CMS
Plan sponsors are also required to disclose to CMS whether their prescription drug coverage is creditable. The disclosure must be made to CMS on an annual basis, or upon any change that affects whether the coverage is creditable. At a minimum, the CMS creditable coverage disclosure notice must be provided at the following times:
- Within 60 days after the beginning date of the plan year for which the entity is providing the form;
- Within 30 days after the termination of the prescription drug plan; and
- Within 30 days after any change in the creditable coverage status of the prescription drug plan.
Plan sponsors are required to provide the disclosure notice to CMS through completion of the disclosure form on the CMS Creditable Coverage Disclosure webpage. This is the sole method for compliance with the CMS disclosure requirement, unless a specific exception applies.
Employers that sponsor group health plans should provide certain benefit notices in connection with their plans’ open enrollment periods. Some of these notices must be provided at open enrollment time, such as the summary of benefits and coverage (SBC).
Other notices, such as the Women’s Health and Cancer Rights Act (WHCRA) notice, must be distributed annually. Although these annual notices may be provided at different times throughout the year, employers often choose to include them in their open enrollment materials for administrative convenience.
In addition, employers should review their open enrollment materials to confirm that they accurately reflect the terms and cost of coverage. In general, any plan design changes for 2022 should be communicated to plan participants either through an updated summary plan description (SPD) or a summary of material modifications (SMM).
This Compliance Overview includes a chart that summarizes the benefit notices employers should provide at open enrollment time.
|SBC||Group health plans and health insurance issuers||Group health plans and health insurance issuers are required to provide an SBC to applicants and enrollees each year at open enrollment or renewal time. Federal agencies have provided a template for the SBC, which health plans and issuers are required to use.
The issuer for fully insured plans usually prepares the SBC. If the issuer prepares the SBC, an employer is not also required to prepare an SBC for the health plan, although the employer may need to distribute the SBC prepared by the issuer.
|Medicare Part D notice of creditable or non-creditable coverage||Employers with group health plans that provide prescription drug coverage||Employers with group health plans that provide prescription drug coverage Employers must notify Medicare Part D-eligible individuals before Oct. 15 each year about whether the drug coverage is at least as good as the Medicare Part D coverage (in other words, whether the prescription drug coverage is “creditable” or “non-creditable”).
Because employers may not be able to identify which individuals are eligible for Medicare Part D, they often provide the Medicare Part D disclosure to all plan participants. Employers will satisfy the timing requirements for this notice if it is provided to all plan participants annually, prior to Oct. 15 of each year.
CMS has provided model notices for employers to use.
|WHCRA notice||Group health plans that provide medical and surgical benefits for mastectomies||Group health plans must provide a notice about the WHCRA’s coverage requirements at the time of enrollment and on an annual basis after enrollment. The annual WHCRA notice can be provided at any time during the year. Employers often include the annual notice with their open enrollment materials. Employers that redistribute their SPDs each year can satisfy the annual notice requirement by including the WHCRA notice in their SPDs.
Model language is available in the DOL’s model notice guide.
|Children’s Health Insurance Program (CHIP) notice||Group health plans that cover residents in a state that provides a premium assistance subsidy under a Medicaid plan or CHIP||If an employer’s group health plan covers residents in a state that provides a premium subsidy under a Medicaid plan or CHIP, the employer must send an annual notice about the available assistance to all employees residing in that state. The annual CHIP notice can be provided at any time during the year. Employers often provide the CHIP notice with their open enrollment materials.
The DOL has a model notice that employers may use.
|SPD||Group health plans subject to ERISA||An SPD must be provided to new health plan participants within 90 days of the date their plan coverage begins. Employers may include the SPD in their open enrollment materials to make sure employees who newly enroll receive the SPD on a timely basis. Also, an employer should include the SPD with its enrollment materials if it includes notices that are required to be provided at the time of enrollment, such as the WHCRA notice.
In addition, an updated SPD must be provided to participants at least every five years, if material modifications have been made during that period. If no material modifications have been made, an updated SPD must be provided at least every 10 years.
|COBRA General Notice||Group health plans subject to COBRA||Group health plans must provide a written General Notice of COBRA Rights to covered employees within 90 days after their health plan coverage begins. Employers may include the General Notice in their open enrollment materials to ensure that employees who newly enroll during open enrollment receive the notice on a timely basis.
The DOL has a COBRA Model General Notice that can be used by group health plans to meet their notice obligations.
|Grandfathered plan notice||Health plans that have grandfathered status under the Affordable Care Act (ACA)||To maintain a plan’s grandfathered status, the plan sponsor must include a statement of the plan’s grandfathered status in plan materials provided to participants describing the plan’s benefits (such as the SPD, insurance certificate and open enrollment materials).
The DOL has provided a model notice for grandfathered plans.
|Notice of patient protections||Health plans that have grandfathered status under the Affordable Care Act (ACA)||If a non-grandfathered plan requires participants to designate a participating primary care provider, the plan or issuer must provide a notice of patient protections whenever the SPD or similar description of benefits is provided to a participant. This notice is often included in the SPD or insurance certificate provided by the issuer (or otherwise provided with enrollment materials).
The DOL has provided a model notice of patient protections for plans and issuers to use.
|HIPAA privacy notice||Self-insured group health plans||The HIPAA Privacy Rule requires self-insured health plans to maintain and provide their own privacy notices. Special rules, however, apply for fully insured plans. Under these rules, the health insurance issuer, and not the health plan itself, is primarily responsible for the privacy notice.
Self-insured health plans are required to send the privacy notice at certain times, including to new enrollees at the time of enrollment. Thus, the privacy notice should be provided with the plan’s open enrollment materials. Also, at least once every three years, health plans must either redistribute the privacy notice or notify participants that the privacy notice is available and explain how to obtain a copy.
The Department of Health and Human Services has model privacy notices for health plans to choose from.
|HIPAA special enrollment notice||All group health plans||At or prior to the time of enrollment, a group health plan must provide each eligible employee with a notice of his or her special enrollment rights under HIPAA. This notice should be included with the plan’s enrollment materials. It is often included in the health plan’s SPD or insurance booklet.|
|Wellness notice – HIPAA||Group health plans with health-contingent wellness programs||Employers with health-contingent wellness programs must provide a notice that informs employees that there is an alternative way to qualify for the program’s reward. This notice must be included in all plan materials that describe the terms of the wellness program. If wellness program materials are being distributed at open enrollment (or renewal time), this notice should be included with those materials.
Sample language is available in the DOL’s model notice guide.
|Wellness notice – ADA||Wellness programs that collect health information or include medical exams||To comply with the Americans with Disabilities Act (ADA), wellness plans that collect health information or involve medical exams must provide a notice to employees that explains how the information will be used, collected and kept confidential. Employees must receive this notice before providing any health information and with enough time to decide whether to participate in the program. Employers that are implementing a wellness program for the upcoming plan year should include this notice in their open enrollment materials.
The Equal Employment Opportunity Commission has provided a model notice guide for employers to use.
|Individual coverage HRA (ICHRA) notice||Employers that sponsor ICHRAs for specific classes of employees (or all employees)||Beginning in 2020, employers of all sizes may implement an ICHRA to reimburse their eligible employees for insurance policies purchased in the individual market, or for Medicare premiums. Employers with ICHRAs must provide a notice to eligible participants about the ICHRA and its interaction with the ACA’s premium tax credit. In general, this notice must be provided at least 90 days before the beginning of each plan year. Employers may provide this notice at open enrollment time if it is at least 90 days prior to the beginning of the plan year.
A model notice is available for employers to use to satisfy this notice requirement.
The Consolidated Appropriations Act, 2021 (the “CAA”), which was signed into law on December 27, 2020, included several provisions impacting group health plans and health insurance issuers. Below is a summary of the provisions focused on mental health parity
and health plan transparency (specifically, broker/consultant commissions and pharmacy benefits and drug costs).
Mental Health Parity
The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), prohibits a group health plan from applying financial requirements (e.g., deductibles, co-payments, coinsurance, and out-of-pocket maximums), quantitative treatment limitations (e.g., number of treatments, visits, or days of coverage), or non-quantitative treatment limitations (such as restrictions based on facility type) to its mental health and substance use disorder benefits that are more restrictive than those applied to the plan’s medical and surgical benefits. MHPAEA compliance has been a focus in DOL audits in recent years. As part of the action plan for enhanced enforcement in 2018, the DOL, HHS and IRS released a self-compliance tool plans and issuers can use to evaluate their plan. However, Section 203 of the CAA
took this a step further, requiring more active engagement by group health plans.
Beginning on February 10, 2021, group health plans were required to perform and document comparative analyses of the design and application of non-quantitative treatment limitations (NQTLs). Specifically, the NQTL analyses must include certain information specified in the CAA, such as, among other things, specific plan terms or other relevant terms regarding NQTLs and the specific substance abuse, mental health, medical and surgical benefits to which they apply, and the factors used to determine that NQTLs will apply to mental health or substance use disorder benefits and medical or surgical
Per the CAA, the DOL, IRS (Treasury) and HHS are required to request no fewer than 20 group health plan analyses per year, and group health plans must provide them to the agencies upon such request. In the last several months, the DOL began requesting the NQTL comparative analyses from plans that are currently undergoing DOL audits for other reasons, as well as from plans not currently under investigation. In addition, plan participants and authorized representatives such as out-of-network providers may request these analyses. Therefore, all plans should be prepared to provide their NQTL comparative analyses at any time
If the agencies determine the group health plan is not in compliance, then the plan must respond to the agencies within 45 days by specifying any actions it will take to come into compliance and providing further comparative analyses demonstrating the plan’s
compliance. If still not in compliance, the agencies will notify all individuals enrolled in the plan of the plan’s noncompliance. This could lead to significant exposure for non-compliant plans, as it basically opens a clear pathway to litigation.
On April 2 2021, the DOL released FAQs regarding these CAA provisions. The FAQs clarify the following:
- Because the requirement to make the comparative analyses available to federal or applicable state authorities was effective February 10, 2021, all plans and issuers should be ready to make their analyses available upon request.
- General, broad, and conclusory statements will not suffice for the analyses. Any analyses should be sufficiently specific, detailed, and reasoned to demonstrate the processes, strategies, evidentiary standards, or other factors used to develop and apply a NQTL for mental health/substance use disorder benefits are comparable to, and apply no more stringently than, those for medical/surgical benefits. The DOL’s MHPAEA Self-Compliance Tool includes a 4-step roadmap for generating a comparative analysis. Therefore, plans and issuers that carefully follow the most recent (2020) MHPAEA Self-Compliance Tool when developing their analyses may be able to identify and mitigate potential issues.
- Specifically, at a minimum, the analyses must contain:
- A clear description of the specific NQTL, plan terms, and policies at issue;
- Identification of the specific mental health/substance use disorder (“MH/SUD”) and medical/surgical benefits to which the NQTL applies within each benefit classification, and a clear statement as to which benefits identified are treated as MH/SUD and which are treated as medical/surgical;
- Identification of any factors, evidentiary standards or sources, or strategies or processes considered in the design or application of the NQTL and in determining which benefits, including both MH/SUD benefits and medical/surgical benefits, are subject to the NQTL, including whether any factors were given more weight than others and why (including an evaluation of any specific data used in the determination);
- To the extent the plan or issuer defines any of the factors, evidentiary standards, strategies, or processes in a quantitative manner, it must include the precise definitions used and any supporting sources
- Whether there is any variation in the application of a guideline or standard used by the plan or issuer between MH/SUD and medical/surgical benefits and, if so, describe the process and factors used for establishing that variation;
- If the application of the NQTL turns on specific decisions in administration of the benefits, the nature of the decisions, the decision maker(s), the timing of the decisions, and the qualifications of the decision maker(s) should be identified;
- An assessment of the qualifications of each expert used, if any, and the extent to which the plan or issuer ultimately relied upon each expert’s evaluations in setting recommendations regarding both MH/SUD and medical/surgical benefits;
- A reasoned discussion of the plan’s or issuer’s findings and conclusions as to the comparability of the processes, strategies, evidentiary standards, factors, and sources (including citations) identified above within each affected classification, and their relative stringency, both as applied and as written, including the results of analyses indicating that the plan or coverage is or is not in compliance with MHPAEA; and
- The date of the analyses and the name, title, and position of the person or persons who performed or participated in the comparative analyses.
- Any of the below practices (which the DOL has observed in the past), may result in an unsuccessful comparative analysis:
- Production of a large volume of documents without a clear explanation of how and why each document is relevant to the comparative analysis;
- Conclusory or generalized statements, including mere recitations of the legal standard, without specific supporting evidence and detailed
- Identification of processes, strategies, sources, and factors without the required or clear and detailed comparative analysis;
- Identification of factors, evidentiary standards, and strategies without a clear explanation of how they were defined and applied in practice;
- Reference to factors and evidentiary standards that were defined or applied in a quantitative manner, without the precise definitions, data, and information necessary to assess their development or application; or
- Analyses that are outdated due to the passage of time, a change in plan structure, or for any other reason.
This means plans should take the necessary time to ensure thoughtful, thorough analyses are conducted now and at any time applicable provisions of the plan change.
- The DOL’s MHPAEA Self-Compliance Tool provides an example of the types of documents and information that would need to be available to support the comparative analyses, such as samples of claims, any process documents, guidelines or other claims processing policies and procedures, or documentation of standards, instructions to providers where management is delegated to an outside service provider, etc. Furthermore, if the comparative analyses reference any type of study, tests, data, reports, meeting minutes/decisions, or other considerations, documentation should be available to support those references.
- State regulators, participants, beneficiaries, or enrollees (or their authorized representatives) may all request, and the plan or issuer is required to provide, the comparative analyses.
- Where applicable, non-grandfathered plans would be required to provide any participants who are appealing an adverse benefit determination with copies of the comparative analyses (and supporting documentation) when providing all other documents the plan relied upon to support the denial of a claim.
- The DOL clarified that it may request discrete comparative analyses specific to a particular area of concern (such as where a complaint was received) but may request them in other instances where it is deemed appropriate by the agency. Currently, it intends to focus on the following NQTLs in its enforcement efforts:
- Prior authorization requirements for in-network and out-of-network inpatient services;
- Concurrent review for in-network and out-of-network inpatient and outpatient services;
- Standards for provider admission to participate in a network, including reimbursement rates; and
- Out-of-network reimbursement rates (plan methods for determining usual, customary, and reasonable charges).
However, the DOL expects that even when comparative analysis is requested in a discrete area or areas, the plan or issuer must provide a list of all other NQTLs for which they have completed a comparative analysis and a general description of any supporting documentation. The DOL’s initial request can broaden at any time, so having all comparative analyses completed, rather than only completing those listed above is essential for plans and issuers. Additionally, while insurance companies have fiduciary responsibility and must prepare the analysis for fully insured plans, third party administrators (TPAs) for self-insured plans typically do not have the same fiduciary responsibility that would require them to prepare the analysis. Sponsors of self-insured plans (including level-funded plans) should inquire with their TPA whether they have completed an analysis specific to their plan or the TPA’s products in general, and whether they are prepared to assist in the event of a request. They may want to introduce language into the administrative services agreement upon renewal to clarify the extent to which the TPA will assist. In most cases, the TPA will be in the best position to perform the analysis – i.e., they will have established the NQTLs and will be able to identify them; they will have all the data and other information necessary for the analysis.
Broker and Consultant Transparency
Section 202 of the CAA amends §408(b)(2) of ERISA and creates new transparency requirements that impact group health plans and their brokers or consultants. Specifically, group health plans must receive the following disclosures from brokers or consultants (or their affiliates or subcontractors) who reasonably expect to receive $1,000 or more
(indexed for inflation) in direct or indirect compensation in connection with providing certain designated insurance-related services for the group health plan:
- A description of the services provided under the contract with the plan;
- Whether the broker, consultant, or their affiliate or subcontractor’s services provided are, or reasonably expected to be in the capacity of a fiduciary;
- A description of all direct compensation, either in the aggregate or by service that the broker or consultant reasonably expects to receive in connection with the services;
- A description of all indirect compensation the service provider, or their affiliate or subcontractor, reasonably expects to receive in connection with the services;
- A description of any compensation that will be paid among the broker, consultant, their affiliate or subcontractor for commissions, finder’s fees, or other similar incentive compensation based on business placed or retained. This must include identification of payers and recipients, regardless of whether it is disclosed as direct or indirect compensation; and
- A description of any compensation the broker or consultant reasonably expects to receive in connection with termination of the contract or arrangement, and how any prepaid amounts will be calculated and refunded.
Failure to comply puts the arrangement with the broker or consultant at risk of being considered not “reasonable.” Timeframes for providing the information to the group health plan and updating the plan of any changes to information previously provided pursuant to these requirements, as well as good faith compliance and other considerations for non-compliance are discussed in more detail in the CAA. These requirements are effective for contracts for covered services executed or renewed on or after December 27, 2021 (one year from enactment of the CAA). We expect more guidance from the DOL prior to the deadline.
Pharmacy Benefits and Drug Costs
Section 204 of the CAA requires group health plans or issuers to begin reporting the following information regarding health plan coverage to the IRS, HHS, and DOL:
- The plan year start and end dates;
- The number of enrollees;
- Each state in which the plan is offered;
- The 50 brand prescription drugs most frequently dispensed by pharmacies for claims paid by the plan, and the total number of claims for each such drug;
- The 50 prescription drugs with the greatest increase in plan expenditures over the plan year before the plan year in which the report pertains, including the amounts expended by the plan for each drug during such plan year;
- Total spending on health care serviced by the plan, broken down by hospital costs, health care provider and clinical service costs for both primary care and specialty care prescription drug costs, other medical costs (including wellness services), and spending on prescription drugs by the health plan and enrollees;
- The average monthly premium broken down by employer share and employee share;
- Any impact on premiums by rebates, fees, and drug manufacturer remunerations for prescription drugs, including the amount paid for each therapeutic class and the amount paid for each of the 25 drugs that yielded the highest amount of rebates and other remuneration from drug manufacturers; and
- Any reduction in premiums and out-of-pocket (OOP) costs associated with rebates, fees, or other drug manufacturer remuneration.
The information reported pertains to the health plan or coverage offered during the previous plan year. The first report is due on December 27, 2021 (one year after enactment of the CAA), while each subsequent annual report is due by June 1st. In June 2021, the agencies released a request for information regarding the impact of the legislation on impacted health plans. Thus, they are in the early stages of implementing regulations, and have not yet indicated how the information will be reported to/received by the agencies.
What’s Next for Employers?
While we expect more guidance on the transparency requirements for brokers and consultants, in the meantime, they should review their existing contracts and disclosures in light of these requirements and begin implementing any necessary changes. Further, group health plans are encouraged to review their coverage of mental health and substance use disorder benefits and carefully follow the DOL’s most recently updated (2020) MHPAEA Self-Compliance Tool when developing their MHPAEA comparative analyses. Finally, later in the year, group health plan sponsors should prepare to comply with pharmacy benefit and drug cost disclosure requirements.
On September 9, 2021, President Biden announced that he ordered OSHA to develop emergency temporary standards (ETSs) that would require employers with 100 or more employees to mandate that employees either receive one of the three available COVID-19 vaccines or submit to at least weekly COVID-19 testing. Employers who do not comply with these requirements could be fined approximately $13,650 per employee. The President also announced the OSHA ETSs will require employers to offer paid time off to employees to receive the vaccine, as well as any time necessary to recover from a reaction to the vaccine.
The President also issued executive orders requiring federal executive branch employees to be fully vaccinated (i.e., no weekly testing option) and federal contractor employees under new or newly extended/newly optioned contracts to comply with vaccine safety protocols. He also announced (1) health care workers at certain facilities that receive Medicaid or Medicare funding must be fully vaccinated, (2) that the Department of Transportation will double its fines for individuals who refuse to wear masks on public transportation, and (3) increased testing availability for individuals either at home (through certain, chosen retailers who will sell the kits at cost) and at pharmacies.
The pending OSHA ETSs, and approaches large employers (i.e., 100 or more employees) and small employer (i.e., fewer than 100 employees) can take to incentivize vaccines are the focus of this alert.
On August 23, 2021, the U.S. Food and Drug Administration (FDA) approved the Pfizer-BioNTech COVID-19 vaccine, one of the three COVID-19 vaccines approved for emergency use in the United States. Due to this approval and the rampant spread of the COVID-19 Delta variant, employers recently began implementing different approaches to encourage individuals to receive the COVID-19 vaccine. Some implemented incentives for employees who are vaccinated, while others took a more aggressive approach by penalizing those not vaccinated with higher health insurance contributions or outright mandating the vaccine as a condition of employment.
In the meantime, on September 9, 2021, President Biden announced that OSHA will issue ETSs mandating employers with 100 or more employees require employees to either be vaccinated or submit to weekly testing. At this time, these rules have not been implemented, so there are no details about how “employees” are defined, how employer size will be determined, whether there will be exceptions for employees who work remotely, when the mandate is effective, how employers are required to implement testing, whether traditional reasonable accommodation requirements apply for individuals with disabilities or sincerely held religious beliefs against vaccinations, and whether testing can be paid for through the employer’s group health plan or whether it must be paid directly by the employer. We expect the OSHA ETSs will address these issues.
While the OSHA ETSs will likely provide significant cover for employers who mandate vaccines for employees, some large employers may still choose to incentivize employees to receive the vaccine in lieu of pursuing or implementing a potentially burdensome weekly testing requirement. Moreover, employers with fewer than 100 employees may still consider mandating vaccines for their workforce, or incentivizing employees to get vaccinated.
As discussed below, any of the above approaches may implicate one or more federal laws and may also implicate state or local laws and regulations.
Until guidance from OSHA is released, employers can rely on recent guidance from the U.S. Equal Employment Opportunity Commission (EEOC) – What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws – related to the COVID-19 vaccine.
Mandating the COVID-19 Vaccine as a Condition of Employment
Employers with fewer than 100 employees may choose to mandate that all employees receive the vaccine, while large employers will have to consider how they will implement the mandate. There are a few different approaches employers can take. They can: (1) contract with a provider to administer the vaccine onsite, (2) contract with a designated provider to administer the vaccine offsite, or (3) instruct employees to get the vaccine from a provider of their choice and provide proof of vaccination status to the employer.
Providing Vaccines Onsite or Through a Provider Contracted by the Employer
One key issue when administering a vaccine onsite or through an employer-contracted provider is whether the receipt of the vaccine itself amounts to a medical examination. According to the EEOC, it does not; however, the analysis does not end there. To administer the COVID-19 vaccine, a health care provider would need to familiarize themselves with employees’ medical history through a series of prescreening questions to ensure the vaccine is medically appropriate. These pre-screening questions could elicit information about a disability, which would implicate the ADA’s provisions regarding disability-related inquiries and could violate Title II of GINA, which prohibits employers from using, acquiring, or disclosing an employee’s or family member’s genetic information, to the extent the screening questions ask about/require the employee (or family members) to provide any genetic information.
As such, to satisfy the ADA, the employer would need to establish the vaccine is both “job-related and consistent with business necessity.” In other words, the employer would need to reasonably believe, based on objective evidence, that failing to receive the vaccine would pose a direct threat to the health or safety of other employees or individuals. Given the contagiousness of the Delta variant, this may not be difficult for employers to establish.
Vaccines Administered by the Employee’s Health Care Provider
If employees may choose the provider who administers the vaccine, such as their neighborhood pharmacy or own medical care provider, then the ADA’s provisions regarding disability related inquiries is not implicated. Further, GINA is not implicated with this approach if the employer merely requires employees to provide proof of vaccination, because administration of an mRNA vaccine in and of itself does not involve the use of genetic information.
In this case, the employer could require an employee to show proof of receiving the vaccine by an independent pharmacist or medical provider, such as by providing a copy of their vaccine card or executing an affidavit confirming they received the vaccine , and this would not amount to a disability-related inquiry.
Note, however, similar to FMLA and ADA records, vaccine records are subject to general privacy protections, and must be stored separately from an employee’s personnel records. Further, employees should be told not to provide any medical, disability, or genetic information in their documentation evidencing receipt of the vaccine, as receipt of that information may implicate the ADA or GINA.
Termination Decisions for Employees Who Refuse the Vaccine
While the employer may satisfy the ADA and/or GINA using one of the above approaches, additional analysis is required before making the decision to terminate an employee who does not receive the vaccine pursuant to the employer’s mandate. These other considerations are discussed in detail below:
ADA Qualification Standards and Reasonable Accommodation
If an employee is unable to receive a COVID-19 vaccine due to a disability, then the employer would need to have a qualification standard to ensure an employee does not pose a direct threat to the health or safety of the workplace. In essence, the employer would need to show the individual’s failure to vaccinate/be able to receive a vaccination due to such disability is a direct threat to other individuals because of a “significant risk of substantial harm to the health or safety of the individual or others that cannot be reduced or eliminated without reasonable accommodation.” Therefore, before an employer could take any action, the employer would need to establish there is a direct threat by demonstrating:
- the duration of any risk;
- the nature and severity of potential harm;
- the likelihood that a potential harm will occur; and
- the imminence of the potential harm.
Even if a direct threat is found, the employer would still be required to determine whether a reasonable accommodation is possible, without undue hardship, which could eliminate or reduce the risk to the workplace.
It is possible an employer can exclude an unvaccinated employee from the workplace if there is a direct threat; however, this does not necessarily mean the employer can terminate the employee. Employees may have other rights under applicable EEO laws or other federal, state, or local laws. Further, when assessing the risk, employers need to consider the amount of their workforce that is unvaccinated, and the frequency or type of contact between vaccinated and unvaccinated employees or unvaccinated employees and customers or clients.
Outright termination without considering any reasonable accommodation could result in an ADA violation. Reasonable accommodation could include a telecommuting option for employees. This would likely need to be a consideration if the employee was previously telecommuting prior to or during COVID-19 shutdowns. If the employee’s job is such that it can be performed remotely, employers may need to consider this option depending on the other facts and circumstances. Further, employers must consider CDC guidance when assessing whether an effective accommodation that would not pose an undue hardship is available.
Ultimately, if a reasonable accommodation cannot be made without undue hardship, then termination may be permissible. These determinations should be made on an individualized employee basis taking all facts and circumstances into consideration.
Sincerely Held Religious Beliefs Under Title VII
Employers also must consider whether religious accommodations may be necessary for employees who are not vaccinated. Under Title VII, an employer must reasonably accommodate an employee’s sincerely held religious belief absent an undue hardship. Without an objective basis for questioning whether the employee’s beliefs are religious in nature or sincerely held, the employer should not request supporting information or documentation regarding a sincerely held religious belief; however, even if the employee provides supporting information or documentation, the employer is not required to allow the employee in the workplace if a reasonable accommodation is not available or if accommodating the employee would cause an undue hardship to the employer. Specifically, an undue burden in this context means the burden is “more than a de minimis cost or burden.”
Again, this is facts and circumstances specific, and an employer should not automatically terminate an unvaccinated employee without considering whether an accommodation is possible or necessary. Per the EEOC, if an employee cannot receive the COVID-19 vaccine because of a sincerely held religious belief, practice, or observance, then the employee may be excluded from the workplace if there is no available or possible reasonable accommodation.
Mandating COVID Vaccine as Condition of Health Coverage Eligibility
While there have been no reports of companies taking this approach, some companies have inquired whether this would be a possibility. This option is the most easily analyzed of the options, as it clearly is addressed by HIPAA nondiscrimination rules. Specifically, under HIPAA nondiscrimination requirements, benefits must be available on a uniform basis for all “similarly situated individuals” and benefits cannot be limited or excluded based on a participant’s health factor, which includes “receipt of health care.” Thus, an employee’s status as COVID-19 vaccinated or not vaccinated is a health factor. Accordingly, an employer cannot exclude an employee from participating in the health plan because he or she did not receive the COVID-19 vaccine.
Excluding Claims Incurred by Unvaccinated Participants
Some employers have questioned whether a group health plan could exclude COVID-19-related claims for an unvaccinated participant. This approach is generally prohibited under HIPAA’s rules prohibiting restrictions based on the source of the injury. Under HIPAA, if a group health plan provides benefits for a type of injury, the plan may not deny benefits otherwise provided for treatment of the injury if the injury results from a medical condition (including both physical and mental health conditions). For example, a plan that otherwise covers hospitalization may exclude benefits for self-inflicted injuries or injuries sustained in connection with attempted suicide; however, if the self-inflicted injury was the result of a medical condition (depression), then the plan must cover the injury. A plan may also deny hospital coverage if the participant engaged in certain dangerous recreational activities (e.g., bungee jumping); however, given that receipt of the COVID-19 vaccine is a health factor under HIPAA, excluding COVID-19-related hospitalization benefits for an unvaccinated participant on the basis that not receiving the vaccine is an inherently dangerous activity is not supportable based on existing guidance. It may also violate the ACA’s prohibition on preexisting conditions.
Employer-Provided COVID-19 Incentives
Despite the mandate, some large employers may still consider incentivizing employees to receive the vaccine to minimize the burden and cost of weekly testing requirements. Further, some small employers may choose to incentivize vaccines for the safety of their workforce and customers/clients.
There are generally two approaches employers take with vaccine incentives: (1) providing monetary or other incentives to employees who show proof of receiving the vaccine, such as $100 bonuses, $50 gift cards, additional paid time off, or other items of value, or (2) increasing premium cost of coverage for employees who are not vaccinated. For example, news sources reported that Delta Airlines intends to impose a $200 surcharge on health insurance premiums for employees who are not vaccinated. Under either approach, employers must consider implications under ERISA and regulations governing wellness plans (HIPAA, ADA, and GINA).
HIPAA Nondiscrimination Considerations
As discussed above, HIPAA nondiscrimination rules prohibit employers from limiting or excluding benefits based on a participant’s health factor. Thus, employers cannot deny coverage to individuals based on whether they receive the vaccine, but they can incentive employees to receive the vaccine or charge a different premium amount to vaccinated employees if offered via a bona fide wellness program. A bona fide wellness program must be reasonably designed to promote health or prevent disease.
Under applicable DOL wellness program regulations, there are two types of wellness programs, participatory and health contingent. A participatory wellness program does not condition receipt of a reward on achievement of a health standard. Health-contingent wellness programs condition receipt of an award on an individual’s satisfaction of a standard related to a health factor or attaining or maintaining a specific health outcome. Health-contingent wellness programs are divided into two categories, activity-based (i.e., individuals are required to perform or complete an activity that is related to a health factor before the individual can obtain a reward) and outcome-based (i.e., individuals must attain or maintain a specific health outcome to obtain a reward).
In addition to meeting other requirements , health contingent wellness programs must offer a reasonable alternative standard for employees to satisfy the requirements under the program for all outcome-based programs, and for individuals for whom it is unreasonably difficult to satisfy the original standard due to a medical condition or for whom it is medically inadvisable to try to satisfy the original standard for activity-based programs.
ADA Wellness Program Considerations for COVID-19 Vaccines
Wellness programs that are subject to the ADA (i.e., those that include a medical exam or disability related inquiry) must, in addition to offering a reasonable alternative standard, where applicable, be “voluntary.” This means, the reward for participating in a wellness program must not be so great as to compel someone to participate. Further, for a health-contingent wellness program, the reward cannot exceed 30% of the cost of employee-only coverage (if 30% of the cost of the family coverage if spouses and dependents can participate). Rewards include financial rewards (e.g., premium discounts, rebates, or modifications of otherwise applicable cost-sharing amounts such as copays, deductibles, or coinsurance) and non-cash rewards (e.g., gift cards, electronic devices, etc.). If tobacco use prevention is part of the program, the reward may be as high as 50% of the cost of coverage. (Note that the reward for the non-tobacco use portion of the program cannot exceed 30% of the cost of coverage.)
For purposes of the COVID-19 vaccine, some employees are not eligible to receive the vaccine because they have certain health risks or other health factors. In such case, the employer must offer a reasonable alternative standard for employees to meet. Furthermore, if the employer intends to ask employees why they are not receiving the vaccine, this would be a disability related inquiry and the program must be “voluntary” for employees. Whether a program is “voluntary” is a facts and circumstances determination and should be made in on an individualized basis. Moreover, if the employer intends to apply a premium differential for employees who are not vaccinated, the program will have to comply with the 30% cap (or 50% if the program also includes tobacco cessation).
In addition to the above, GINA wellness program regulations may also be implicated if an employer receives too much information when substantiating that an employee received the vaccine, or employees must explain that they are not eligible to receive a vaccine due to health or risk factors. Like under the ADA wellness program rules, wellness program participation must be “voluntary,” under GINA, which means the employer’s incentives for receiving the vaccine must not be so great as to make the employee feel compelled to participate.
Unfortunately, at this point, it is unclear what amount of incentive would make participation involuntary given the EEOC’s recent withdrawal of the proposed wellness regulations, which limited incentives for certain wellness programs to a de minimis amount. Until new regulations are implemented, if the ADA and/or GINA are implicated, employers should take a reasonable approach in evaluating their program to ensure the program is truly voluntary for employees.
Additionally, religious exemptions under Title VII may also apply if an employee must explain why they are declining the vaccine.
For applicable large employers (ALEs), for purposes of the Affordable Care Act (“ACA”) a wellness incentive or surcharge may impact affordability, as wellness incentives (other than solely related to tobacco use) are treated as unearned for purposes of determining whether coverage is “affordable” under the Affordable Care Act, and employees are treated as having to pay the surcharge for “affordability” purposes.
Finally, employers should consider any state or local privacy or other laws that may prohibit, limit, or impact any vaccine mandate or incentive program offered by the employer.
Large employers should be on the lookout for the OSHA ETSs and, in the meantime, discuss how they intend to implement the mandate once effective – whether the employer will offer a vaccine and testing blended approach to accommodate employee preference, or whether the employer will outright mandate the vaccine for all employees (taking into consideration any necessary, reasonable accommodations). Small employers may continue to evaluate the approach they intend to take, if any.
If large or small employers intend to implement incentives, they should consider the EEOC’s guidance, applicable federal, state, and local laws, and any potential employee relations issues they may face as they evaluate their options.
For purposes of a mandate, employers should be mindful of the ADA, Title VII, GINA, and applicable state or local laws, and should engage in an individualized analysis of the facts and circumstances of each unvaccinated employee with counsel. Further, small employers should ensure any vaccine requirements serves some business purpose. For example, if an employer has a mostly remote workforce and remote employees do not engage in business travel or directly engage with clients, requiring the vaccine would not likely serve a business purpose.
If employers choose to incentivize receipt of the vaccine, either with cash or other gifts or by creating premium differentials for individuals who show proof of receiving the vaccine, they should ensure the program, or any incentives offered for receiving the vaccine, complies with all applicable laws and regulations and are offered through a bona fide wellness program meeting all wellness program regulations.
We recommend employers work directly with counsel when designing or implementing wellness programs or making employment termination decisions (for those implementing a mandate).