Employer health plans must pay the cost of a COVID-19 vaccine
As many have likely heard, multiple COVID-19 vaccine candidates have rapidly reached the final stages of development and are showing extraordinary effectiveness. The vaccines are beginning to be submitted to the FDA for emergency approval before hitting the market. This means that employers need to start thinking about how this will affect their workplace benefit plans now.
As my colleague Charlie Plumb recently wrote, employers are generally permitted to implement mandatory vaccine policies that require employees to be vaccinated before returning to the workplace. Assuming no disability or religious exception applies, the next question is this: Who has to pay for it?
Surprisingly, the answer is pretty simple: Employer-sponsored group health plans (whether fully or self-insured) will be required to pay the full cost of the vaccine for employees covered under the plan with no cost-sharing (copay, coinsurance, deductible) to the employee.
General preventive service rules
As employee benefits professionals and insiders are inevitably aware, the Affordable Care Act already requires group health plans and insurers to cover certain “preventive care” items with no cost-sharing (also called first-dollar coverage), such as the flu vaccine. These items are generally listed on the HealthCare.gov website.
The typical process for an item to be classified as a “preventive service” starts with certain governmental groups, such as the CDC or the United States Preventive Services Task Force making a “recommendation” (although it is not as much a recommendation as a requirement) that an item should be classified as a preventive service. The item must then receive first-dollar coverage under a group health plan or policy starting with the first plan year that begins one year after the date the recommendation is made. Also, first-dollar coverage is generally only required when participants receive care from an in-network provider.
Accelerated coverage timeline for COVID-19 vaccine
Because of the ensuing pandemic, Congress found this timeline unacceptable. The CARES Act modified the preventive service rules for the COVID-19 vaccine in early March before any sign of a vaccine was in sight. The CARES Act requires group health plans to provide first-dollar coverage of COVID-19 vaccines within 15 business days after the vaccine receives an “A” or “B” rating from the United States Preventive Services Task Force or receives a recommendation from the Advisory Committee on Immunization Practices of the CDC.
Just to reemphasize, plans generally have at least a year after a new item is added to the preventive services list to provide first-dollar coverage. But now, first-dollar coverage for a COVID-19 vaccine is required within 15 business days after the applicable governmental recommendations are made. Therefore, plan sponsors need to keep an eye out for these recommendations to ensure that their health plans are being administered properly (and are properly amended to reflect this requirement).
Full coverage required for out-of-network vaccine
Also distinct from the traditional ACA preventive care rules, group health plans and insurers must pay the full cost of COVID-19 vaccines regardless of whether administered in- or out-of-network. In a joint interim final rule published by the U.S. Departments of Treasury, Labor, and Health and Human Services, plans and insurers are required to pay out-of-network providers a “reasonable” reimbursement rate in order to provide a “meaningful” benefit to participants and, presumably, to entice enough providers to administer the vaccine. A reasonable rate is generally the prevailing market rate, the Departments say. The Departments deem the amount paid under Medicare to be reasonable. Finally, providers who are participating in the CDC COVID-19 Vaccination Program are prohibited from balance billing (also known as surprise billing) vaccine recipients.
The bottom line
The big implication of these rules is that employers will have to bear the full cost of the vaccine for each employee covered under its health plan. To the extent an employer is going to mandate employees to become vaccinated before returning to the workplace, employers will have to weigh the cost of requiring employees to become vaccinated (when some employees might not have gotten the vaccine otherwise) against the costs of possible continued loss in productivity due to an ill workforce or employees working from home.