Employers, we know it’s an ongoing struggle to deal with the bevy of ever-changing COVID-19 workplace-related guidance and laws. You are grappling with running your business while our government agencies are still trying to establish firm rules governing the meaning behind these laws.

Large companies are setting precedents with their employee vaccination requirements. Delta Airlines has dominated headlines because they require unvaccinated workers to pay a $200 monthly health insurance surcharge.

Many colleagues ask me how Delta can do this. Please note that personal and legal opinions do vary, but I’ll share why some lawyers believe Delta’s surcharge may be permissible under Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA).

Employer Latitude to Design Group Health Plans

No Federal law requires employers to provide group health plan coverage to all employees on the same terms and conditions. Employers have flexibility, within certain limitations, to design their group health plan eligibility, coverage terms, and premium costs.

HIPAA, as amended by ACA, does prohibit health plans from discriminating (e.g., charging different premiums or different deductibles, copayments, or other cost-sharing requirements) against an individual based on the individual’s “health factors,” which may include one’s vaccination status.

However, HIPAA recognizes exceptions whereby employers can differentiate benefits they award to employees based on certain “wellness programs.”

Categories of Wellness Programs

Under HIPAA, workplace wellness programs have two general categories: (1) participatory wellness programs and (2) health-contingent wellness programs. This distinction is important because participatory wellness programs are not required to meet the same nondiscrimination standards for health-contingent wellness programs.

(1) Participatory Wellness Programs

Participatory wellness programs are generally available without regard to an individual’s health status. The program does not offer rewards, or rewards are not based on an employee’s health. These programs comply with the nondiscrimination requirements so long as the program is made available to all similarly situated individuals. There is no limit on financial incentives for participatory wellness programs.

These programs include reimbursement for fitness center memberships or smoking cessation programs (not based on whether the employee quits smoking).

(2) Health-contingent wellness programs

Health-contingent wellness programs require individuals to satisfy a standard related to a health factor to obtain a reward. There are two types of health-contingent wellness programs:

  1. Activity-only wellness programs: This type of wellness program requires an individual to perform or complete a health activity to obtain a reward (for example, walking, dieting, or exercising). Activity-only wellness programs do not require an individual to attain or maintain a specific health outcome.
  2. Outcome-based wellness programs: This type of wellness program requires an individual to attain or maintain a specific health outcome to obtain a reward (such as not smoking, achieving results on weight loss, or meeting exercise targets). Generally, these programs have two tiers: (1) a measurement, test, or initial screening, or (2) a more extensive program targeting individuals who do not meet the initial standard with wellness activities.

Outcome-based programs allow health plans to target specific, rather than the entire population of participants and beneficiaries, with the rewards based on health outcomes or participation in reasonable alternatives. For example, plans can target those individuals with high cholesterol for participation in cholesterol reduction programs or those who use tobacco for participation in tobacco cessation programs.

5 Conditions For Health-Contingent Wellness Programs

Health-contingent wellness programs with the following five conditions qualify can avoid violation of nondiscrimination:

  1. The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year.
  2. The total reward for meeting the plan’s wellness requirement to a health factor is limited and must not exceed 30 percent of the cost of employee-only coverage under the plan. For example, for an employee who elected self-only coverage with a total monthly premium of $1,600 per month, the $200 surcharge would total 13% of the total premium cost of the coverage, which is less than the 30% limit imposed by the final ACA wellness plan regulation.
  3. The program must be reasonably designed to promote health and prevent disease.
  4. The program must offer rewards to all similarly-situated individuals and provide reasonable alternatives or waivers for people unable to participate (i.e., people with disabilities).
  5. All plan materials must disclose the program’s terms, including the availability of reasonable alternative options or waivers.

Back to Delta

Provided Delta satisfies the above five factors, Delta’s $200 monthly surcharge may be a permissible activity-only, health-contingent wellness program under HIPAA/ACA. That is: the program requires an individual to become fully vaccinated (the “activity”) for purposes relating to the individual’s health status (protection against severe illness or death because of COVID-19), and in return, the vaccinated employee will not incur the $200 monthly surcharge (the award).


Healthcare laws are very complex and have many exceptions for wellness programs. At a high level, here are a few:

  1. Companies must offer a reasonable alternative to any individual for whom it is unreasonably difficult due to a medical condition to satisfy a wellness standard or for whom it is medically inadvisable to attempt to satisfy the standard.
  2. Wellness programs need to be voluntary. Is a $200 monthly surcharge ($2,400 a year) coercive, and therefore is Delta’s program not voluntary?
  3. More intricacies involve the Americans with Disabilities Act and the Civil Rights Act, which prohibits discrimination based on religion.

Delta Delays

Hopefully, further clarifying guidance is on the way so that other employers can shape and implement their plans accordingly.

Until such guidance is issued, we recommend employers take a measured approach when designing and implementing any plans to ensure that employees do not consider any incentives as coercive. Additionally, employers should ensure that such plans provide for medical and religious-based exemptions.

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