Predictions of rising medical plan rates are escalating as the need to ensure workplace safety and the costs associated with COVID-19 treatment continue to mount. The impact on company health insurance premiums can be astronomical—to the extent that the costs of plans could push some employers out of business.

What can companies do to minimize rising healthcare plan expenses?  

A properly designed and developed wellness program that takes coronavirus vaccine status into account is one of the most effective solutions businesses can enact to help protect themselves from soaring medical plan costs. As the current situation becomes a “pandemic of the unvaccinated,” those inoculated against COVID-19 are largely seeing protections against severe illness, hospitalizations, and death—making higher premiums or a surcharge for those remaining unvaccinated a logical next step.

Such a program must comply with all Health Insurance Portability and Accounting Act (HIPAA) wellness program rules and reflect compliance with recent Equal Employment Opportunity Commission (EEOC) guidance related to vaccine accommodations.

Under a compliant program, an employer may condition an incentive in terms of the amount of employee premium contribution based on participation in a wellness program. Many employers are already familiar with such a system as it will resemble a smoking cessation program.

Here are the major requirements:

  • Surcharge must comply with wellness incentive limits that consider existing incentives to 30% (up to 50% for tobacco surcharges) of the total cost of employee-only coverage. Adding a new incentive could cause a plan to exceed the limit, which would require reducing or modifying other incentives to allow for a vaccine-related incentive.
  • Surcharge must allow employers to maintain compliance with the Affordable Care Act (ACA) Employer Mandate affordability rules. Non-tobacco-related wellness incentives must be treated as “not met” for purposes of determining ACA affordability. Adding a vaccine-related surcharge effectively increases the cost to employees and makes it more difficult to offer the coverage at an affordable contribution amount.
  • Consider time-of-year plan deadlines and health plan rules. If implemented mid-plan year, will employees be able to opt out if they experience a significant cost increase?
  • Make sure the wellness program follows state laws.
  • With booster shots on the horizon, ensure your plan considers what the definition of “fully vaccinated” will mean.

Some employers have considered limiting group health plan coverage to those that are vaccinated or limiting health plan claims for COVID-19-related illnesses to only those that are vaccinated. These suggestions would clearly violate HIPAA non-discrimination rules, and therefore should be avoided.

A carefully administered plan that maintains compliance with governing laws will help ensure not only the wellness of your workforce, but of your business.

Not currently an Employer Advantage client?


We don’t just give quotes—We provide strategic business proposals.

-Free strategic assessment of your business needs

-Quick and easy account setup and seamless transitions

-Urgent requests | Please Call: Toll Free 877.476.9520

Click here to see our other helpful “Blog for All Employers”

About Employer Advantage

A New Path to HR Bliss – Trusted for more than 30 years, Employer Advantage frees you from the administrative and compliance burdens of having employees so you can focus on your business success. Versatile enough for companies of all sizes, our unique service combines comprehensive management of your employee administration and compliance with the latest software solutions, tailored to meet your individual needs and company culture. Our full-service management of Human ResourcesPayrollHealth and Benefits, Workplace Safety and more, enhance your profitability while reducing the costs and risks associated with employment law compliance. We provide your employees with top-notch assistance and benefits that help you increase productivity, save time and money, and attract and retain a talented workforce. And for small and mid-sized businesses, we bring you economy of scale with access to Fortune-500-level benefits, specialty assistance, and savings that would not be possible to attain on your own. Headquartered in the Midwest and serving more than 500 companies and 10,000 worksite employees throughout the country, Employer Advantage is an IRS-Certified Professional Employer Organization (PEO) (CPEO). Experienced, certified, and trusted.

About Post Author