Raising Insurance Premiums for the Unvaccinated: Proceed with Caution
Workspan Daily
February 08, 2022
Key Takeaways

  • Showing support. A new survey finds employee support for raising unvaccinated workers' insurance premium is growing.
  • Upping insurance premiums. Since the Supreme Court decision that essentially struck down the OSHA vaccine mandate, experts expect to see more companies moving forward with premium surcharges on unvaccinated employees.
  • Many factors to consider. Employers that go this route have much to think about before doing so, such as the amount of the surcharge, when and where vaccines are administered, and making allowances for workers with legitimate reasons for remaining unvaccinated.

Late last summer, Delta Air Lines CEO Ed Bastian made news when he notified the organization’s roughly 75,000 employees that those who remain unvaccinated against the coronavirus would start paying increased health insurance premiums.

At the time, Bastian cited steep costs associated with insuring employees who had been hospitalized with COVID-19 as a key factor in his decision to raise premiums for unvaccinated workers.

“The average hospital stay for COVID-19 has cost Delta $50,000 per person. This surcharge will be necessary to address the financial risk the decision to not vaccinate is creating for our company,” he wrote in an Aug. 25 memo to Delta employees, noting that all Delta employees who had been hospitalized with COVID-19 since the emergence of the B.1.617.2 variant were not fully vaccinated.

At least one recent survey finds that a growing number of employees would be on board with leadership at their organization following in Bastian’s footsteps and imposing higher insurance premiums on co-workers who continue to forego COVID-19 vaccines.

Conducted in January of this year, an Eagle Hill Consulting poll of 1,000 U.S.-based workers found 56% of respondents saying they support employer requirements for vaccine boosters. Close to 80% indicated that employers should encourage or require employees to be vaccinated for in-person work.

And, when asked if their unvaccinated colleagues should pay higher insurance rates, 47% said they would be supportive, compared to 41% who said the same in 2020.

“Our research indicates workers continue to want employers proactively involved in health and safety protocols,” said Melissa Jezior, Eagle Hill Consulting president and CEO, in a statement. “From vaccine and booster mandates to masking and social distancing requirements, most workers continue to look to their employer to stay engaged in COVID-19 precautions.”

There’s additional data suggesting that employers will continue to take precautions against the spread of COVID-19. In fact, a January 2022 poll conducted by Mercer found that close to half (44%) of nearly 500 employers have a vaccine mandate in place for employees working onsite. Another 6% said their organization is planning to implement such a requirement, with another 9% still considering it.

Wade Symons, national leader of Mercer’s regulatory resources group, thinks we’ll see more companies raising insurance premiums for the unvaccinated as well.

“Since the Supreme Court decision that essentially struck down the OSHA vaccine mandate and testing option for large employers, we’ve seen an increase both in the number of employers who have indicated they are moving forward with a premium surcharge on unvaccinated employees and in the number of employers who are considering a surcharge and are asking for guidance on the considerations and legal parameters,” he said.

Of course, companies going this route have much to consider, such as the amount of the surcharge, said Symons.

“Initially, amounts discussed were in the range of $50 to $100 per month,” he said. “But, more recently, we’re hearing that employers are looking at amounts closer to the 30% maximum amount permitted under HIPAA, with several implementing or considering $150 to $200 per month surcharges.”

Timing is a factor as well.

“It can be implemented mid-year,” Symons said. “However, employers will want to allow a period of time for the unvaccinated employees to get vaccinated to avoid the surcharge. Six weeks seems to be the norm, taking into account operations and administration components to tracking, managing and applying a surcharge.”

And, if employers are offering vaccinations onsite, EEOC requirements under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) come into play when the employer or its agent is facilitating the vaccine.

“This means that any surcharge cannot be so large as to be coercive, a standard that is hard to determine. Also, a surcharge cannot be applied to a spouse or dependent when the employer is involved in the vaccination administration, since, per the EEOC, this results in the employer receiving genetic information in the form of family medical history,” he said, adding that the need to allow those with medical conditions or religious beliefs to avoid the surcharge through an alternative standard or waver can also create administrative challenges.

Lori Shannon, a Chicago-based partner in Barnes and Thornburg’s benefits and compensation practice group, foresees more employers using wellness programs to offer premium incentives, i.e., discounts, to participants in their group health plans for receiving COVID-19 vaccinations, rather than imposing penalties for passing on the vaccine.

“This is because employers have an interest in taking all possible measures to curtail the cost of providing group health plan coverage to their employees, and one method for doing this is to encourage preventive medicine, such as vaccines,” she said.

“However, an employer considering this approach as a way to promote overall workplace safety should recognize that this wellness benefit only reaches participants in its group health plan, which may not include the entire employee population.”

As Shannon points out, the United States Department of Labor, Treasury and Health and Human Services issued guidance last fall in an effort to address this issue.

For compliance purposes, that guidance mandates that the wellness program under which the COVID-19 vaccine-related premium incentive is offered must be offered at least once a year and be reasonably designed to promote health or prevent disease, said Shannon.

In addition, the organization must “offer a reasonable alternative to obtain the premium incentive or a waiver for individuals for whom the vaccine is medically inadvisable,” she continued.

Employers must also “provide that the reward, when added to all other non-tobacco related wellness incentives for health-contingent programs will not exceed 30% of the total cost of employee-only coverage, or, if a dependent can also earn the incentive, the cost of the coverage in which the employee and dependent are enrolled.

“Note that an employer may require a statement from a medical professional as to whether the COVID-19 vaccine is medically inadvisable for a specific individual,” Shannon concluded.

“Also, in determining affordability of coverage for purposes of the ACA requirements, the COVID-19 vaccine-related premium incentive is disregarded, which is significant for employers in terms of cost-sharing.”

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