On November 5, 2021, the Occupational Health and Safety Administration published an emergency temporary standard (ETS) covering COVID-19 vaccination and testing. Under the ETS, employers with more than 100 employees must adopt a policy requiring employees to be vaccinated against COVID-19. Covered employers may allow unvaccinated employees to undergo periodic COVID-19 testing and wear a face covering at work. If the employer provides or pays for the vaccinations or testing, the employer may be creating an employee benefit plan that is subject to ERISA and other federal laws. This client alert discusses employee benefit considerations relevant to vaccination and testing programs—those already in place and those adopted in response to the ETS. A separate client alert addressing the ETS itself is available here.
Lawsuits challenging the ETS have already been filed. On November 6, 2021, the Court of Appeals for the Fifth Circuit issued a temporary stay of the ETS, noting that there is "cause to believe there are grave statutory and constitutional issues" with the ETS. Expedited briefing has been ordered.
When is a vaccination or testing program an ERISA group health plan?
As a general rule, when an employer provides or pays for its employees' medical care, the arrangement constitutes an ERISA group health plan. However, there are some exceptions. As relevant here, courts have long held that there is no plan if there is no "ongoing administrative scheme." This exception is often applied to employer-sponsored health fairs and flu shots, which are generally not considered to be plans. What if an employer provides or pays for employees' COVID-19 vaccinations? The vaccinations would seem to be similar to flu shots, and therefore would not be a plan. However, the ETS requires the employer to obtain and retain proof of vaccination, which may rise to the level of an administrative scheme. What if the employer provides or pays for employees' COVID-19 testing? The ETS requires frequent testing for most employees and requires a fair amount of recordkeeping concerning the tests. An ETS-compliant testing program will likely involve an ongoing administrative scheme.
We expect many employers to argue, "A COVID-19 vaccination or testing program should not be considered an 'employee benefit' at all, let alone a group health plan. This program is an occupational health and safety measure. We are only doing it to comply with the ETS." We understand and appreciate this argument. Unfortunately, under current guidance and caselaw, neither occupational health and safety programs nor legal compliance programs are categorically exempt from ERISA.
If my company's vaccination or testing program is covered by ERISA (a Vaccination/Testing Program), what is our first concern?
An ERISA group health plan must either comply with or be exempt from the Affordable Care Act (ACA). If a plan is neither compliant nor exempt, the penalties are substantial. A Vaccination/Testing Program will not comply with the ACA, because it will not offer all of the ACA-required "preventive services." However, a Vaccination/Testing Program will be exempt from the ACA if it provides only "excepted benefits." There are two categories of excepted benefits that are relevant here: on-site medical clinics and employee assistance programs (EAPs).
On-Site Medical Clinics
If the Vaccination/Testing Program is offered through an on-site medical clinic, the program provides excepted benefits. There are no regulations or other guidance documents explaining what constitutes an on-site medical clinic.
In order for a Vaccination/Testing Program to be an EAP, it must meet all five of the following requirements.
- The Program must not require employees to enroll in another health plan before being vaccinated or tested.
- The Program must not require employees to use or exhaust benefits under any other health plan before being vaccinated or tested.
- The Program must not provide "significant benefits in the nature of medical care." Whether benefits are "significant" depends on the type of benefits provided, and on the amount, scope, and duration of the benefits. Under FAQs issued by the Departments of Labor, Treasury, and Health and Human Services, an EAP that complies with the other three requirements will not be deemed to provide significant benefits in the nature of medical care "solely because" it offers COVID-19 testing while a public health emergency declaration or national emergency declaration is in place. The FAQs do not say whether there is some limit to COVID-19 testing that can be covered by an EAP, and the Departments have not provided other guidance on the issue. In our view and in the view of many benefits practitioners, the Departments are unlikely to challenge weekly tests as "significant benefits" that disqualify an EAP. However, this is a grey area, and there is no definitive answer.
- The Program must not require employees to pay any premiums or contributions to participate in the program.
- There must be no cost-sharing under the Program. This fifth requirement has some practical implications, which we address immediately below.
No Cost Sharing
If an employer wants its Vaccination/Testing Program to be an EAP, there are several ways to structure the Program to comply with the no-cost-sharing requirement.
- The employer can contract with a provider who will perform the vaccination/testing at the work site, at no cost to the employees.
- The employer can require employees to obtain a certain type of vaccination/test from a specific provider, such as a pharmacy chain or heath care system. The employer can reimburse the employees for the cost, or it can be billed directly by the provider. Identifying a specific provider gives the employer an opportunity to negotiate a favorable rate with that provider.
- The employer can allow employees to obtain a vaccination/test at the provider of their choice and reimburse the employee for the full cost. This structure is legally permissible but financially risky—an employee could get a very expensive test—and therefore is strongly discouraged.
What if the employer allows employees to obtain a test at the provider of their choice, and agrees to reimburse the employee up to a specific dollar amount? This structure is problematic. If the cost of the test exceeds the maximum reimbursement amount, the employee will be paying out of pocket—cost-sharing. An employer might try to argue that testing is widely available for less than the maximum reimbursement amount, and therefore that the Vaccination/Testing Program does not require cost-sharing by the employee. This argument is not likely to be successful, and consequently, the Program risks being in violation of the ACA. We would not recommend this structure.
If my company has a Vaccination/Testing Program, what else do we need to consider?
ERISA Disclosure and Reporting Requirements
As a group health plan subject to ERISA, the Vaccination/Testing Program must comply with certain disclosure and reporting requirements. This means that the employer must adopt a plan document, distribute a summary plan description, and file an annual report (Form 5500) for the Program. Additionally, the Program must comply with ERISA's claims and appeals procedures. Employers with a pre-existing EAP likely already comply with these requirements. Those that do not can satisfy these requirements with minor adjustments to their plan documents.
Assuming that the employer had at least 20 full-time employees in the prior calendar year, the Vaccination/Testing Program must comply with COBRA. For example, if an employee resigns or is terminated, the employee must be offered continuation coverage for the Vaccination/Testing Program.
Unless the Vaccination/Testing Program is administered by the employer itself and covers fewer than 50 employees, the Vaccination/Testing Program is a covered entity subject to HIPAA. HIPAA limits the Program's ability to disclose an individual's vaccination records and medical test results to the employer directly. Nevertheless, there are some HIPAA-compliant ways for the employer to obtain the information. For example, the employer can require the employee to submit documentation (provided by the Program to the employee) showing the employee's COVID vaccination status and test results. Because the information comes to the employer from the employee—not the Program—HIPAA is not implicated. Alternatively, the employee can sign a HIPAA authorization allowing the Program to disclose the information to the employer. If the vaccination or testing is conducted by a HIPAA-covered health care provider, there are additional options.
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Vaccination and testing programs vary widely. The way in which a program is structured will affect whether and how various employee benefit laws apply. Employers with programs in place, as well as employers in the process of designing them, are encouraged to communicate with counsel.
If you have questions or concerns regarding this client alert, please contact the authors, any member of Venable's Employee Benefits and Executive Compensation Group, or your regular Venable lawyer.