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Employers eyeing health insurance surcharges for unvaccinated employees

Insurance Forums Staff

Workers who have yet to be vaccinated against COVID-19 could soon be paying as much as $20 to $50 more per month for health insurance—essentially a surcharge similar to those for tobacco use—according to one of the nation’s largest health benefits consultancies.

Wade Symons, leader of the regulatory resources group at Mercer, said in a recent brief that with the Delta variant driving up infections and hospitalizations throughout the country—at the same time that vaccination rates have stalled—health coverage surcharges for the unvaccinated are a tactic employers are reviewing as an alternative to a mandate.

Symons noted that a few big names, including Google and Facebook, announced plans recently to require all employees to get vaccinated for COVID-19 before returning to the office. And, while many employers are willing to take additional measures to increase vaccine levels, most employers continue to hold off on mandates because of potential employee relations issues that such a move might provoke.

“The rationale for adding a surcharge to health insurance contributions for unvaccinated employees is seen as similar to that for a tobacco-use surcharge,” Symons said in the brief. “If an employee is unvaccinated and contracts a COVID-19 infection, that creates higher claims costs, which can impact the employer’s bottom line, and mean higher future contributions for other employees. Beyond plan costs, there are the public health benefits of greater vaccination rates, in addition to workplace safety considerations.”

Symons told USA Today that clients have been contacting him about how to charge unvaccinated employees more for their insurance to cover the costs of massive hospital bills. He believes some unvaccinated workers could face an additional $20 to $50 per paycheck—which would translate into several hundred dollars annually in extra costs. He did add he would expect it to be on the lower end of that scale.

“The surcharge approach is intended to cause employees to change behavior voluntarily. While less draconian than a vaccine mandate, there are a few compliance issues that employers must consider,” Symons said in the brief. “The employer would have to follow the analysis for vaccine incentives, as laid out by the EEOC. If the employer is involved with vaccination, or contracts with a third party to provide the vaccine to employees, the surcharge must not be so substantial as to be ‘coercive,’ and consideration must be given to providing accommodation to those who are unable to get vaccinated due to a disability or sincerely held religious belief.”

Additionally, Symons said a vaccine surcharge would need to be compliant with the HIPAA/ACA rules related to wellness programs.

“The cautious approach will be to treat the incentive as ‘health contingent,’ which means the surcharge must be limited and a reasonable alternative standard must be offered to those unable to get vaccinated. ACA affordability and state law restrictions related to vaccine status must also be considered,” he said.

“Despite the concerns above, surcharges are a potential option, and we expect more employers to explore their viability,” Symons added. “Employers are looking for options, but with labor shortages, vaccine mandates may remain a bridge too far.”

If that’s the case, adding a surcharge for the unvaccinated to a vaccine incentive program may be the next trend to gain momentum as employers seek to safely return employees to worksites and get their businesses back to normal.



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