COVID-19 Vaccine Premium Surcharges and Health Care Reform

Posted by BAS - 07 October, 2021


The U.S. Department of Labor, Department of Health and Human Services and Department of Treasury jointly issued a series of frequently asked questions addressing items relating to COVID-19 and benefits. One of those FAQs provides guidance to employers considering offering a premium discount or surcharge for employee vaccination status and how that action impacts Affordable Care Act compliance.

Employers are permitted to offer participants in the plan a premium discount for receiving a COVID-19 vaccination if such discount follows established wellness plan rules. The discount must be reasonably designed to promote health or prevent disease and there must be a reasonable alternative standard to qualify for the discount. The reward may not exceed 30% of the total cost of employee-only coverage and eligibility must be offered at least once per year.

A premium incentive discount that follows the wellness plan rules is not treated as part of the cost of coverage for determining whether the employer-sponsored health coverage is affordable.

If an employer imposes a premium surcharge for an individual who does not get a COVID-19 vaccination, there is a different result on the affordability calculation. A premium surcharge for vaccination status is taken into account when determining affordability of health coverage. The surcharge is added to the premium amount when determining if the employee’s contribution for single-only coverage is no more than 9.5% of household income (9.61% in 2022, as indexed for inflation).

Employers considering a premium penalty for employees who do not have a COVID-19 vaccine should consider the impact that penalty will have on the affordability of their coverage for health care reform purposes.

Topics: Health Care Reform (ACA), Covid, coronavirus resources, Affordable Care Act

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