Wellness Incentives for Vaccine Compliance

Wellness programs may generally include a health plan premium incentive discount for those who have received the COVID-19 vaccine(s) or, alternatively, a premium surcharge for those who are not vaccinated. It is legal for employers to offer both premium incentives and surcharges to health plans for vaccination status. Recently, the “Departments” (HHS/DOL/Treasury) released a set of FAQs addressing some specifics on incentives/surcharges.

Here are twelve considerations and a high-level “how to” guide on adding a vaccine premium differential incentive (whether a discount or surcharge) to your company’s wellness program, based on the recent FAQ’s.

*Please note that this is not an exhaustive list of considerations. Employers will want to be familiar with State Labor Laws and should consult with legal counsel before implementing a premium surcharge.

Determine the Incentive Amount

Any Assistance Applicable law governing wellness programs imposes a maximum incentive of 30% of the total cost of employee-only coverage (or 30% of the total cost of coverage if dependents can also earn the incentive). “Total cost” is defined as the total cost of the premium. When calculating the 30% maximum, employers must also consider other incentives they are currently offering as a part of a wellness program. Incentives for a wellness program cannot exceed 30% in aggregate.

Caveat: Different rules apply to tobacco cessation programs (not relevant here), programs that ask disability-related questions or require medical exams, and employer-administered vaccine clinics (discussed below).

Make Uniform Offers

Employers must offer the same vaccine incentive to all similarly situated employees (for example, all employees at the same worksite).

Decide Timing

Employers will want to consider the date they want employees to have completed their vaccine regime in order to receive a premium differential. The simplest way to do this is to align vaccination requirement dates with the end of a plan year. Then provide the premium differential to employees who have completed their vaccination with the start of the new plan year. Employers will want to be mindful of timing and give employees plenty of time to comply with the new requirement (e.g., some vaccines require two dosages spread out over time) or to satisfy the reasonable alternative standard, described below (e.g., if a reasonable alternative standard is attending classes, you will want to provide enough time to complete these classes).

Employee Communication

Communicate to employees the new vaccination requirement and as mentioned above, give them time to obtain the vaccination(s) or satisfy a reasonable alternative before you implement the discount or surcharge.

Provide Notice to Employees & Offer A Reasonable Alternative

The notice should be based on the HIPAA sample wellness program notice (see page 25); sample language as follows:
“Your health plan is committed to helping you achieve your best health. A reward of a reduced premium for providing proof of receipt of the COVID-19 vaccine is available to all employees enrolled in the health plan. If you think you might be unable to receive the vaccine, you might qualify for an opportunity to earn the same reward by different means. Contact us at [phone number] and we will work with you (and, if you wish, with your doctor) to find a COVID-19 preventive measure with the same reward that is right for you in light of your health status.” Reasonable alternatives to the vaccine for employees could include proof of negative COVID-19 test, masking, workplace distancing, and COVID-prevention education (among other things).

Give A New Opportunity Each Year

For employees who do not obtain a vaccinated by the deadline, employers may give a second opportunity to get vaccinated and still be eligible for the incentive at least once per year (ideally, aligned with open enrollment each year, to the extent a vaccine premium incentive still applies for future years).

Be Mindful of “Affordability”

When determining whether you are offering “affordable” coverage to employees under the Affordable Care Act, employers generally need to use the full, undiscounted premium amount for every employee, including vaccinated employees (special rules apply to tobacco cessation incentives, not relevant here).


Proof of vaccination and other information collected should be kept confidential and not part of the employee’s main employment record. Access to these records, similar to HIPAA information, should only be accessible to those need the data.

Discount Now, But Don’t Implement a “Surcharge” Until the Change of the Plan Year

If an employer wants to implement a change outside of a new plan year, they may want to start with offering a premium incentive vs. premium surcharge. Some states have specific labor laws that could prohibit a change in the premium cost-share amount. At each plan year, employees consent to the deduction of their premium cost-share amount. Applying a surcharge and increasing their cost-share in the middle of the plan year without employee consent could be in violation of some states labor laws. Employers should seek advice from legal counsel.

Do Not Require that Vaccinations be Obtained On-Site

Allowing employees to receive a vaccine from their provider of choice gives them flexibility and may lead to higher compliance rates. Employers may ask employees for proof of vaccination status.

Is Your Workforce Unionized?

If employees are part of a union, it is best practice to check the collective bargaining agreements and assess whether a vaccine premium differential would be prohibited under the agreement prior to implementation.

Accommodate for Religious Objections

Applicable law requires an employer to consider and provide reasonable accommodations based on legitimate religious objections, similar to those religious accommodations needed for employers that require vaccination for entering the workplace.


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