7 Vaccine Surcharge Considerations
September 7, 2021

Business leaders are wrestling with how to influence vaccination rates within their employees. The implementation of any reward or penalty imposed by an employer to their employers falls within a narrow exception within the Health Insurance Portability and Accountability Acct (HIPAA) Wellness Plan Rules

Wellness plans must be activity or participation based simply to ensure employers are not discriminating against employees who are medically unable to reach certain wellness goals because of their underlying health. With participation based programs, the member simply needs to go through the steps outlined. A vaccine initiative could be a wellness program in and of itself but there are serious considerations to talk through first.

A surcharge would impose a higher premium cost share onto unvaccinated employees. Since the surcharge effectively changes the cost of the plan, this could open up a new open/special enrollment. Processing an open enrollment off cycle can certainly be done but leaders should confirm with the insurance carrier whether they will even allow enrollment to re-open.

Dispensing with that issue, here are 7 considerations for implementing a surcharge:

  • How do you offer an alternative to people who can’t get the vaccine due to religious or disability reasons?  To have a wellness plan that doesn’t discriminate, you have to find an alternative to getting the vaccine that will enable these people to also avoid the surcharge.
  • How will you address those people who don’t have your insurance?  Adding a surcharge on coverage will have no impact on this group at all regarding the vaccine.
  • You will have to tailor the surcharge so that it is not deemed “coercive” under the EEOC/ADA wellness plan regulations. This means no more than 30% of the cost of single coverage.
  • If you add a surcharge to your plan costs, these surcharges have to be added to the cost of the least expensive plan when calculating your ACA affordability (i.e. if the employee’s share of the premium was $120 a month and you have a $50 surcharge per month, the new affordability premium is $170, which may not fit affordability percentage of hourly rate or W2).
  • Such a change may constitute a material plan change, which requires you to give 60 days advanced notice to all employees before you can implement this (if it’s not open enrollment).
  • You will need to address how employees prove they have been fully vaccinated, describe how you will secure that information (according to HIPAA) and what you will do if an employee has provided a forged or fake vaccine card. 
  • You may also need to address the issue of booster vaccines, as vaccine efficacy may be limited with FDA and CDC recommendations continuously evolving.

Unintentional Consequences
It is terribly difficult to find employees right now.  It doesn't take much to bump into the large number of “now hiring” signs in every business.  This decision could upset some employees. In a market where finding a new job is not that difficult, this may generate a  turnover.  This may not be the best course of action simply from an employee relations/turnover standpoint.  Consider a “carrot” approach (a bonus for getting the vaccine equivalent to the surcharge amount) may be a better course to consider than the “stick” approach of a surcharge.  Additionally, it completely detaches the reward from the health plan, which significantly reduces the level of complexity involved.  (Side Note: Employers will still need to provide accommodations for those with religious or disability barriers to receiving the vaccine).

This type of plan may have significant legal implications. State laws may vary. It is strongly recommended that you consult your benefits advisor and/or an attorney before implementing material plan changes like this.

SPECIAL CREDIT to #TeamOVD for this piece.

Topics: Healthcare Health Insurance Healthcare Navigation Wellness Employee Health
Eric Hannah

Written by Eric Hannah

Eric is an employee benefits advisor at Olivier VanDyk Insurance and a catalyst for change. Through a multi-faceted, two-decade healthcare career, he developed a unique perspective on personal well-being, healthcare navigation and insurance systems. This experience inspired Eric to introduce an innovative approach to employee benefits – putting employers and employees in charge of their own care and spend. Eric believes that employee benefits should be a tool to achieve the optimal employee experience. Today, he helps forward-thinking business leaders develop strategies that create value.