How will the federal vaccine/testing mandate impact self-funded group health plans?
For employers who have not implemented a vaccine mandate, this pending requirement has significant implications.
On September 9th, President Biden addressed the nation, announcing a six-point COVID-19 action plan to combat the current surge in COVID-19 cases, largely driven by the Delta variant. The plan includes a series of executive orders and instructions to federal agencies. In addition to requiring most federal workers and contractors to get vaccinated with no testing alternative, the plan calls for the Centers for Medicare and Medicaid Services (CMS) to issue a rule mandating that health care workers in most health care facilities that accept Medicare and Medicaid funding get vaccinated.
Most controversially, President Biden revealed his intention to require that all private-sector employers with more than 100 employees vaccinate their employees or have them submit to weekly COVID-19 testing. While this private sector mandate, if it survives inevitable legal challenges, will impose significant burdens on many employers, it will almost certainly also result in increased costs for their self-funded group health plans.
Related: Businesses question logistics, cost of Biden vaccine plan
The federal mandate on the private sector will come in the form of an emergency temporary standard (ETS) issued by the Occupational Safety and Health Administration (OSHA). The ETS is expected to be released by early November, possibly even earlier, and to lay out in detail the vaccination/testing mandate. It will also require covered employers to provide paid time off for employees for the time it takes workers to get vaccinated or to recover if they experience adverse side effects post-vaccination. Altogether, the ETS could impact approximately 80 million private-sector workers, many of whom are covered by self-funded group health plans. Businesses that fail to comply with the federal mandate could face fines of up to $14,000 per violation.
For employers who have not implemented a vaccine mandate, this pending ETS has significant implications. From an operations standpoint, employers will need to formulate written policies to ensure that all employees are either vaccinated or submit to weekly testing, administer those policies, ensure that key personnel are properly trained to manage those policies, implement an enforcement scheme, keep written records of their compliance (accounting for applicable privacy laws), and prepare for potential enforcement actions, including audits and internal whistleblower complaints which may be filed by their own employees.
Aside from the many administrative challenges noted above, any of which could be daunting, employers face another, potentially more substantial cost to comply with this pending federal mandate: the cost of vaccination and testing. Under the Families First Coronavirus Response Act (FFCRA), group health plans must cover the cost of COVID-19 diagnostic testing with no cost-sharing to the participant throughout the duration of the so-called “emergency period” (which has not expired).
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed in March of 2020, expanded the testing requirement to include certain tests that are not approved by the Food and Drug Administration (FDA). Further, the CARES Act required group health plans to pay for COVID-19 vaccines (and vaccine administration fees) which were recommended for use by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention (CDC).
Currently, group health plans must pay for COVID-19 testing whenever an employee or a covered dependent has a medical reason for seeking care and not when the testing is performed merely for monitoring purposes. Note that health care providers have significant discretion in determining whether a COVID-19 test is medically necessary. For those employers that opt not to implement a vaccine-only mandate and choose instead to adopt a vaccine or weekly testing mandate (as the ETS will permit), they may think that they need not cover the cost of testing because in most cases it will be for monitoring purposes. Despite this seemingly logical thinking, those employers should not count on this rationale.
Neither the White House nor OSHA has announced whether employers must pay for weekly testing; however, OSHA’s current and past behavior reveals that it favors the idea of requiring employers to pay for safety-related measures in the workplace. For example. OSHA’s current COVID-19 ETS for health care (the “health care ETS”) requires health care employers to pay for vaccinations and to provide a brief amount of paid leave to employees to get vaccinated and recover from any potential adverse side effects of vaccination. See 29 C.F.R. 1910.502(m).
According to the Kaiser Family Foundation, the median cost for a COVID-19 test is $127. For employers that permit weekly testing to satisfy the pending federal mandate, this cost could add up very quickly. Assume an employer with 125 employees and a self-funded group health plan permits 50 of those employees to utilize a weekly COVID-19 testing option to meet the requirements of the federal mandate. At $127 per test, that could cost the employer’s self-funded group health plan $6,350 per week, or roughly $27,000 per month.
At a time when most self-funded group health plan costs are already sky-high and increasing due to the pandemic, adding a potential cost of tens of thousands of dollars per month will be an enormous burden for many employers. Indeed, many will want to factor this potential cost into their analysis of whether they should permit a testing alternative at all to satisfy the federal mandate.
Importantly, President Biden announced that in order to meet the inevitable increased demand for COVID-19 testing, he invoked the Defense Production Act to produce as many as 280 million COVID tests. In addition, the administration disclosed that it would partner with retailers such as Kroger to make-at-home, rapid COVID-19 tests available to customers at cost for a limited duration. As a result of these initiatives, it is possible that the price of COVID-19 tests could come down substantially in the short term. Still, employers should plan on facing increased costs for their self-funded group health plans as a result of increased vaccinations and testing (should they permit the option). Moreover, paying for COVID-19 vaccines and testing is not the only benefits-related requirement expected to be included in the ETS. As explained above, affected employers will also be required to grant employees paid time off to get vaccinated or to deal with adverse side effects employees may experience from a COVID-19 vaccine.
Shortly after President Biden announced this federal mandate, some 24 states, including Texas, Florida, and South Dakota, as well as small business advocacy groups, threatened to sue the administration. In their view, the federal mandate is unconstitutional. Defenders of the administration’s actions point to OSHA’s authority to adopt standards to address grave risks in the workplace. To strengthen the federal mandate’s chances at being upheld in the courts, OSHA will need to establish that COVID-19 is a grave risk in the workplace when the agency publishes the rule in the Federal Register. The legal test for the federal mandate will be made clearer once the actual text of the ETS is released, but until then, employers should prepare for increased costs, including to their self-funded group health plans.
Brady Bizarro, Esq., is the director of legal compliance & regulatory affairs for The Phia Group. He specializes in regulatory, transactional, and compliance matters related to healthcare and employee benefits law. He provides general consulting services to clients, including employers, third-party administrators, brokers, and vendors associated with health benefit plans on matters related to the health insurance industry, including ERISA, ACA, and HIPAA compliance.
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