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Employers weigh insurance surcharges for unvaccinated workers


Employers looking to get their workforces vaccinated against COVID-19 are focusing on sticks, instead of carrots, as vaccinations stall around the country.

Charging unvaccinated workers with higher insurance premiums could help employers fully vaccinate their workforces and mitigate the health and financial risks of employees contracting COVID-19.

About 10% of employers have offered cash and prizes to persuade workers to get immunized, but those tactics may have outlived their usefulness. Private and public employers increasingly are imposing mandates instead that require workers to be vaccinated or, in some cases, to submit to regular COVID-19 testing as a substitute.

Early in the nationwide vaccination campaign, employers were comfortable staying on the sidelines but now more understand their crucial role in brining the pandemic to a close, said Wade Symons, a partner and leader of Mercer’s regulatory resources group. “It is important for employers to be sending the right messages about vaccination and getting behind these efforts,” he said.

Around 65% of workers say their employers encouraged them to get vaccinated, and 72% say they trust their companies to provide reliable information about the vaccines, according to a Kaiser Family Foundation COVID-19 Vaccine Monitor report published in June.

Now some companies are weighing the advantages and disadvantages of increasing health plan premiums on employees who refuse the vaccine and don’t qualify for medical or religious exemptions.

“Employers feel like that may be justified, similar to a surcharge for those that use tobacco, because of the potential for unvaccinated employees to cost more from a medical claims perspective,” Symons said.

While most businesses still want vaccination to remain a choice for workers, 20 to 30 large employers are investigating the possibility of premium surcharges for unvaccinated employees, Symons said. Companies want to shield themselves from the medical costs of hospitalizing COVID-19 patients and create safe workplaces for all employees.

In the healthcare sector, more than 96% of physicians and 83% of nurses are vaccinated, according to American Medical Association and American Nurses Association surveys. So far, more than 1,500 hospitals have implemented employee vaccination mandates.

Higher health insurance premiums for unvaccinated people could provoke a backlash from employees who don’t want the vaccine, however, said Adam Block, assistant professor of Public Health at New York Medical College and founder of Charm Economics.

Employers that want to avoid surcharges could instead offer wellness credits that reduce health insurance premiums for workers who get inoculated, as some companies do for employees who get annual flu shots, Block said.

Companies considering premium surcharges also must be mindful of federal laws governing health insurance and employee benefits, Block said.

While the Affordable Care Act prohibits insurers from charging higher premiums to unvaccinated people, employers are still able to encourage vaccination through penalties and mandates.

However, Equal Employment Opportunity Commission rules restrict employers promoting vaccinations from instituting incentives or surcharges so large that they is considered coercive, Block said.

Under the Americans with Disability Act, employers are required to provide reasonable accommodations for employees aren’t vaccinated against COVID-19 due to a disability. The Civil Rights Act mandates that accommodations must also be made for employees who do not comply based on a sincerely held religious beliefs.

Typically, employers can modify health insurance premiums to offer tax-free incentives or penalties to employees as part of a workplace wellness program, said Bob Neiman, partner with Much Shelist’s Healthcare Law Group.

Full FDA approval of the Pfizer-BioNTech, Moderna and Johnson & Johnson vaccines would strengthen the grounds for vaccine mandates and insurance surcharges, Symons said. That’s despite the fact that the U.S. Department of Justice issued an opinion stating that employers are not prohibited from imposing vaccination requirements even though the vaccines are only available under an emergency use authorization.

Because employers are interested in increasing vaccination levels soon, they are likely to begin rolling out surcharges next month, giving employees time to get vaccinated, Symons said.

“Healthcare providers more than employers in other sectors have struggled with the concept of vaccine mandates because they’ve been concerned that if they mandate the vaccines, they might have 20% of their nurses quit and then they couldn’t care for their patients,” Neiman said.

But healthcare workers resistant to the vaccine may prefer getting the shots or paying the penalities if the alternative is finding a new job during a pandemic, Neiman said. Still, employers should consider the risks of implementing incentives and disincentives based on the vaccination rates of their individual workforces and their geographical areas, he said.

Health insurance companies on their own are unlikely to modify premiums or benefits to add vaccination-related surcharges or incentives, said Paul Keckley, managing editor of The Keckley Report. Instead, they will set premiums based on community vaccination rates to anticipate where COVID-19 costs will be higher, he said.



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