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COVID Surcharge Permitted by HIPAA?

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Many news outlets are reporting the decision by Delta Airlines to impose a $200/month surcharge on employees who refuse the COVID vaccine.  Here is a link to the Wall Street Journal's article: Delta Air Lines to Impose $200 Monthly Charge on Unvaccinated Employees, Add Testing Requirements - WSJ

My initial reaction is that COVID vaccination status is a "health factor" under Treas. Reg. 54.9802-1(a)(1)(iv) (Receipt of health care) or (v) (Medical history).  One could also argue that refusing the COVID vaccination a health factor because it is analogous to the dangerous activities listed under "evidence of insurability" in Treas. Reg. 54.9802-1(a)(2)(ii).

It seems like the $200/month is a higher premium under 54.9802-1(c) for a similarly situated individual - it is a stretch to argue that COVID vaccinated employees/non-COVID vaccinated employees are not "similarly situated" because vaccination status is a bona fide employment-based classification under 54.9802-1(d)(1).

That leaves the exception for nondiscriminatory wellness programs in 54.9802-1(f), and specifically the exception for "activity only" wellness programs in 54.9802-1(f)(1)(iv), since the $200 is related to a health factor.  The activity-only wellness program would need to complete with the frequency, size of reward, reasonable design, and uniform availability/reasonable alternative standards requirements of 54.9802-1(f)(3)(iv).  It seems like the employee's personal physician can offer an alternative if he/she is willing to say that obtaining the COVID vaccine is not medically appropriate for that individual - although it is unclear what the alternative would be in this circumstance. 54.9802-1(f)(3)(iv)(C)(4)

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One imagines the corporate-communications writers thought carefully about how to not use the five-letter word that is the airline's business name.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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I reluctantly agree with OP - vaccination status is a "health condition" and therefore plans cannot discriminate in terms of benefits which includes employee premiums. The loophole is the activity-based wellness plan exception (subsection f).

"An activity-only wellness program is a type of health-contingent wellness program that requires an individual to perform or complete an activity related to a health factor in order to obtain a reward but does not require the individual to attain or maintain a specific health outcome." 

Here, the activity is getting a vaccination.  In order to be "reasonable," the wellness program incentive cannot be more than 30% of the employee-only premium (is $200 too much?) and there must be reasonable alternatives for those who cannot fulfill the activity because of a health condition. There is no exception for those who cannot fulfill the activity due to political opposition. This is going to decrease the number of people who are adversely impacted by the requirement to a very small percentage of the employer's population. So long as Delta accepts a doctor's opinion that an employee is medically unable to get vaccinated and then waives the $200 surcharge, there is no problem with the design.


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Here's an interesting contrary position on activity-only vs. outcome based that I disagree with (footnote 3):


Some practitioners may argue that a wellness program that requires an individual to be vaccinated against COVID-19 in order to pay a reduced premium amount is an activity-based wellness program because the program is requiring the participant to undertake a certain activity related to a health status (i.e., get vaccinated).  However, we think the better argument is that the program required the participant to obtain or maintain a certain status (i.e., being vaccinated) in order to receive the reduced premium amount.  Therefore, it is an outcomes-based program.  This is similar to a program that provides for reduced premiums for non-tobacco users, which are outcomes-based programs, based on the participant's status as a non-tobacco user.  As noted above, outcome-based wellness programs must provide a reasonable alternative standard for anyone who does not meet the initial standard.


I disagree because with the vaccine you simply complete the activity of taking the shot(s).  But there’s no requirement to attain or maintain a specific health outcome.  It’s not like attaining or maintaining a certain BMI.  Smoking cessation requires a continuing obligation for the individual.  I don’t see that as analogous.  "Being vaccinated" requires no additional steps to maintain that outcome.

It’s not just an academic point.  The ability to get a reasonable alternative standard regardless of whether taking the vaccine is unreasonably difficult due to a medical condition or medically inadvisable to attempt is probably a major issue for many employers.  That right applies only if you treat the vaccine incentive as outcome-based (as opposed to activity-only).

See slides 12 and 26 here for a quick overview: 2021 ABD Wellness Program Guide

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The Tri-Agencies have confirmed in FAQ guidance today that the activity-only wellness program standards apply:


Q3: May a group health plan (or health insurance issuer offering coverage in connection with a group health plan) offer participants in the plan a premium discount for receiving a COVID-19 vaccination?

Yes, if the premium discount complies with the final wellness program regulations.9,10 A premium discount that requires an individual to perform or complete an activity related to a health factor, in this case obtaining a COVID-19 vaccination, to obtain a reward would be considered a wellness program that must comply with the five criteria for activity-only wellness programs described in paragraph (f)(3) of the final wellness program regulations.11

To satisfy these criteria, a wellness program that provides a premium discount to individuals who obtain a COVID-19 vaccination must be reasonably designed to promote health or prevent disease and must provide a reasonable alternative standard to qualify for the discount. For example, the wellness program may offer a waiver or the right to attest to following other COVID-19-related guidelines to individuals for whom it is unreasonably difficult due to a medical condition or medically inadvisable to obtain the COVID-19 vaccination in order to qualify for the full reward. The plan must also provide notice of the availability of the reasonable alternative standard under the wellness program. Further, the reward the plan provides in connection with the vaccine incentive program must not exceed 30 percent of the total cost of employee-only coverage and must give individuals eligible for the program the opportunity to qualify for the reward under the program at least once per year.


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