Delta (the Airline) v. Delta (the Variant): Health Plan Premium Surcharges for Unvaccinated Employees

On Wednesday, August 25, Ed Bastian, the CEO of Delta Air Lines, Inc. (“Delta”), notified employees that Delta’s self-insured health plan is facing rapidly-rising costs due to the increasing numbers of employees requiring treatment for COVID-19. Mr. Bastian disclosed the various measures the airline is taking to fight those rising costs, including COVID testing and masking policies. In addition, Delta will charge unvaccinated employees who participate in Delta’s group health plan a $200 per month premium surcharge. Delta’s measures, along with the worldwide surge in COVID-19 cases, due in large part to the coincidentally named “Delta Variant,” have caused many employers to explore the possibility of implementing a similar vaccine-status-related premium surcharge. While a premium surcharge may seem like a simple incentive, employers should be aware of the myriad of laws and regulations (some of which are in a state of flux) governing the issue.

The Health Insurance Portability and Accountability Act (“HIPAA”)

HIPAA’s nondiscrimination rules generally prohibit employer-sponsored health plans from charging higher premiums based on a health factor, such as vaccination status.¹  However, under the HIPAA rules, an employer can establish a wellness program and provide awards to employees based on their participation in the wellness program. In this case, the wellness program would simply be the employer requiring proof that the employee received the vaccine, and the award would be the absence of a surcharge for vaccinated employees. To ensure that a wellness program isn’t just health-factor discrimination in disguise, the HIPAA rules provide employers with a set of wellness program requirements.

HIPAA’s wellness program requirements are different with respect to a “participatory wellness program” versus a “health-contingent wellness program.”

• Participatory Wellness Program – A “participatory wellness program” is a wellness program that bases an award on participation only; the participant is not required to satisfy a health factor to obtain the reward. The sole regulatory requirement of a participatory wellness program is that it be available to all similarly-situated employees.

• Health-Contingent Wellness Program – A health-contingent wellness program is one in which a participant must complete an activity related to a health factor to obtain the award.

There is no clear guidance (yet) with respect to whether receipt of the COVID-19 vaccine would be considered an activity related to a health factor – so it is unclear whether such a program must meet the requirements of a participatory wellness program or a health-contingent wellness program. However, because the HIPAA rules generally categorize wellness programs under which some employees may have valid health-related conditions that prevent participation as “health-contingent,” it is safer to classify a COVID vaccine surcharge as a health-contingent wellness program. Note that if a wellness program is determined to constitute a health-contingent wellness program, but the wellness program does not meet the applicable requirements, the employer could be fined up to $100 per day per participant.

The regulatory requirements with respect to a health-contingent wellness program are relatively robust:

• The program must be available to all similarly-situated employees;

• The program must be reasonably designed to promote health or prevent disease;

• Participants must be able to qualify for the award at least once per year;

• Employers must provide employees with a notice describing the wellness program;

• The award cannot exceed 30% of the total cost of coverage under the plan. In a fully-insured plan, the “total cost of coverage” is simply the premium cost. However, in a self-insured plan, the “total cost of coverage” can be more difficult to determine; and

• Reasonable accommodation must be provided if an employee is unable to receive the vaccine due to medical constraints. Employers can require proof of the medical condition, such as a medical certification, and have a wide latitude to determine reasonable accommodation. Reasonable accommodation can be anything from simply waiving the vaccine requirement to requiring an individual to attend a COVID-mediation class. However, if the employer requires a health-related reasonable accommodation (such as a COVID test), the accommodation itself is subject to the health-contingent wellness program requirements.

The Americans with Disabilities Act (the “ADA”)

The ADA governs disability-related inquiries made by employers. Asking for proof of vaccination is not a disability-related inquiry under the ADA. However, if an employer asks why an employee did not receive the vaccine, such as to determine whether the employee requires reasonable accommodation under the HIPAA rule, that inquiry is likely a disability-related inquiry subject to the ADA.

Like HIPAA, the ADA does provide for set wellness program rules under which an employer may be able to make an inquiry as to an employee’s vaccine-related status, as long as the wellness program is voluntary. However, unlike the HIPAA rules, the state of the ADA rules is less clear. In 2016, the EEOC issued final wellness program rules, which limited the incentives for voluntary wellness programs to a percentage of the cost of certain insurance coverage. These final rules were challenged in court and subsequently repealed. The EEOC then redrafted the rules to mirror the HIPAA rules in most respects. However, the most recent version of the rules, drafted under the Trump administration, will not be made final until reviewed and finalized under the Biden administration. Although the ADA rules remain proposed, they demonstrate the EEOC’s current position that, in general, a wellness program that complies with the HIPAA requirements will also comply with the ADA requirements.

 The Genetic Information Non-Discrimination Act (“GINA”)

GINA prohibits employers from requesting certain health information from an employee relating to the employee’s health or the employee’s family member’s health. The EEOC has stated that GINA does not prohibit employers from incentivizing employees and their family members from getting the COVID-19 vaccine. Under proposed regulations issued by the Trump administration (but placed on hold under the Biden administration), GINA prohibits an employer from asking “why” a family member did not get immunized, even in the context of a wellness program. Therefore, an employer must be careful in structuring a program that incentivizes vaccines for employees’ health plan dependents.

Title VII of the Civil Rights Act of 1964 (“Title VII”)

Title VII provides that employer-sponsored benefits must be administered in a manner that does not create a disparate impact on employees due to their “sincerely held religious beliefs.” Under Title VII, employees who do not get the COVID-19 vaccine due to religious beliefs may have a claim that a wellness program imposing a health premium surcharge on unvaccinated employees violates Title VII. Therefore, employers should carefully structure their wellness programs to provide reasonable accommodation for employees with sincerely-held religious beliefs as well as to employees with medical conditions, such as requiring individuals who do not get the vaccine for religious reasons to watch a training video outlining actions they can take to reduce the likelihood of contracting and spreading COVID-19.

If you have questions about the updated guidance or wish to discuss other benefits-related issues, please contact a member of AGG’s Employee Benefits team.

[1] Earlier in the pandemic, the U.S. Department of Health and Human Services, U.S. Department of Labor, and U.S. Department of the Treasury provided guidance stating that a wellness program offering COVID-19 diagnosis and testing would not be subject to the HIPAA nondiscrimination rules. However, that guidance did not explicitly extend to vaccination programs.