October 1, 2022

Can companies make the unvaccinated pay more for health insurance?

AUSTIN (KXAN) — As COVID-19 cases surge and hospitals across Texas fill up with patients battling the virus, big companies are considering using a newer tool to incentivize vaccinations: charging unvaccinated workers more for health coverage.

Delta Air Lines was the first major employer to announce it was taking this tactic. In August, Delta CEO Ed Bastian announced unvaccinated employees enrolled in its healthcare plan would have to pay $200 extra in health insurance each month.

Bastian said the rise in premiums for unvaccinated workers was necessary to offset the costs of covering medical bills for workers who ended up in the hospital with COVID-19.

“The average hospital stay for COVID-19 has cost Delta $50,000 per person,” said Bastian in August.

In October, The U.S. Department of Labor gave companies the greenlight to institute similar insurance surcharges for the unvaccinated – with stipulations. For one – the surcharge could not be more than 30 percent of the workers total monthly premium.

“There’s a growing issue and concern about the employer’s ability to provide affordable health insurance for all of its employees, when in reality, the impact of the cost of that coverage and the increases in costs are at this point growing more and more based upon individuals who are choosing not to be vaccinated and therefore incurring higher claims and costs under their health plan,” said Brian Johnston, a Kansas based principal for Jackson Lewis law firm.

Joseph Lazzarotti, a New Jersey based principal for Jackson Lewis law firm, trained in employee benefits, says with this new federal guidance workers should expect more employers with self-funded insurance to place surcharges on unvaccinated employees.

“I can tell you that as you’re getting increased questions, so are we, “said Lazzarotti. “This idea of will the booster be required and what does that mean to be fully vaccinated? Because that can potentially affect these programs,” said Lazzarotti.

The Department of Labor likened the surcharge for unvaccinated employees to the ‘smoke tax’ some companies levy against workers who use cigarettes or vape pens. Through personal wellness plans, the department of labor says employers can ‘reward’ workers who choose not to smoke or to get vaccinated for COVID-19 with lower insurance premiums.

The federal agency warns employers must give its employees the opportunity – at least once a year – to decide if they will get vaccinated and avoid the surcharge. Under federal regulation, employers also must offer a reasonable alternative standard to avoid the surcharge for employees who can’t be vaccinated because of a medical condition.

“If there’s a medical condition that prevents you from being vaccinated, that’s a completely different situation,” said Johnston. “If you are in that situation, then go to your employer and say, this is my circumstance, and say, I can’t have the vaccine for these reasons, and they have an obligation to then accommodate you based on that circumstance. That is your right.”

Can companies make the unvaccinated pay more for health insurance?