Unvaccinated? You might see higher health insurance premiums  

Employers can charge more for those who haven’t been vaccinated  

Photo of Angela Mulka

Delta Airlines recently made the news by announcing it would require employees who have not received the COVID-19 vaccine to pay $200 more per month for their health care insurance.

“It’s the first headline I’ve seen where a major company has gone so far to implement charging a higher premium if you don’t get vaccinated,” said Norbert Kuegle, who is a partner of Warner’s Employee Benefits/Executive Compensation Practice Group. “And the dollar amount is pretty significant, too. $200 dollars a month is an eyebrow raiser.”

Can other employers across the nation do this?

The answer is yes.

If the program is structured to comply with wellness program rules under the Health Insurance Portability and Accountability Act and the Affordable Care Act, employers can require employees who are covered by their health plan to pay a higher premium if they are unvaccinated.

Although we typically think of HIPAA as a privacy law, it also includes health nondiscrimination rules that prohibit an employer from charging employees higher health insurance premiums based on health factors. However, under HIPAA regulations and the Affordable Care Act, an employer can offer financial incentives under its health plan to individuals who participate in its wellness programs.

And, a wellness program can include incentives for getting the COVID-19 vaccine, such as a premium surcharge for those people who are unvaccinated.

If a company enacts these policies, they can get an unvaccinated person to pay more per month because they’re at a higher risk of contracting COVID-19, according to Kugele.

About 49% of the country’s total population receive employer-sponsored health insurance (also called group health insurance), according to the Kaiser Family Foundation.

“When an employer sponsors a health plan for its employees, it typically does not charge the full cost of the coverage to employees,” Kugele said. “Typically, it asks employees to contribute part of the cost, and the employer pays the rest.”

“Employees typically pay a small percentage of the actual cost of the health plan,” Kugele continued. “There are laws like the Affordable Care Act and HIPAA, which are medical nondiscrimination laws, that say that an employer cannot charge an employee more based on how healthy they are. There’s certain exceptions for smoking or things like that, but it’s a very narrow list of exceptions. And, typically you can’t discriminate against your workforce in premiums based on their health.”

Employers can get around these medical nondiscrimination laws by using wellness programs that are reasonably designed to improve health or prevent disease.

“A lot of programs try to put incentives in place so that people stay healthy and aren’t subject to chronic diseases and such. You can have incentives that take the form of premium surcharges or premium discounts. So, if you participate in the wellness program and do the things that it asks you to do, you’ll pay less in your healthcare coverage.

“These same rules can be used with respect to COVID-19 vaccinations. You can offer an incentive for people to get vaccinated as part of your wellness program. So, those who are vaccinated would pay less for their health coverage and those who aren’t vaccinated would pay more. That’s what Delta Airlines has done. They’ve basically used their wellness program to try and incentivize people who aren’t vaccinated to get the COVID-19 vaccine.”

There are limits to wellness programs under the law. Under the regulations around this, the incentives, or surcharges, typically cannot be more than 30% of the full cost of coverage.

This news crosses over the exact same way to different states. Every company does have these federal laws that apply to them, so technically, any company could enact a program like this. It is an alternative to a vaccination mandate for employers to consider, according to Kugele.

“It wouldn’t surprise me to see other companies in the nation doing this. I know some of the clients that we work with really don’t want to go down the mandating the vaccine road” Kugele said. “I know some of them will look at this.”

“Certainly, anybody who gets COVID-19 and ends up in the hospital can incur some substantial medical costs,” he continued. “So, I think it is fair for employers to try and incentivize people to get that vaccine because it’s likely to save the plan some money.”

According to corporate law firm Warner Norcross & Judd, a premium surcharge for unvaccinated individuals will have to comply with the following HIPAA/ACA rules:

• A participant must be given the opportunity each year to qualify for the reward (i.e., avoid the surcharge).

• The maximum reward for all health-contingent wellness programs (including the vaccine incentive) cannot be more than 30% of the total cost of the employee’s health coverage (both employee and employer contributions), though incentives tied to smoking can go up to 50% of the cost.

• The program must be reasonably designed to improve health or prevent disease.

• The program must meet uniform availability and reasonable alternative standards. A COVID-19 vaccination incentive program must include both of the following features:

1. The program must provide a reasonable alternative activity (or waiver of the activity) for any individual for whom it is unreasonably difficult due to a medical condition or medically inadvisable to perform the activity (which can be verified with the individual’s personal physician when it is reasonable to do so). Coming up with an alternative may not be easy, so a waiver may be the most practical solution.

2. The full reward must be available to someone who completes the program or satisfies the reasonable alternative standard (or waiver of the standard). Depending on how the program is structured, if an employee who is paying the surcharge becomes vaccinated, the employee may be entitled to a refund (or credit) of the surcharges the employee has paid up to that point in the plan year.

3. All materials that describe the wellness program must also describe the availability of a reasonable alternative activity/standard (or, if applicable, the availability of a waiver of the activity/standard).