Are you considering an unvaccinated employee surcharge?

As businesses continue their push toward pre-COVID norms, the unvaccinated employee remains a crucial health issue. However, while employees continue their war against vaccine mandates, employers push back. For example, some companies deduct surcharges directly from their unvaccinated employees’ paychecks.
In response to continued vaccine refusals, companies have used cash as an added motivation. Some companies are rewarding vaccine-compliant employees with bonuses. Others have taken a more punitive stance.
- United Airlines has a zero-tolerance policy. They fired many employees who failed to meet the company’s October 25, 2021 vaccine mandate deadline. Employees have been unsuccessful in contesting this action in court.
- Delta Airlines announced its company’s vaccine progress on August 25, 2021. At that time, 75% of its employees had complied with vaccination requests. The company also announced a series of conditions for non-compliant employees.
- Mask requirements for all indoor settings
- Weekly COVID tests
- A $200 monthly surcharge for enrollees in Delta’s healthcare plan
Surcharges reflect increased healthcare costs due to COVID-19
The unvaccinated employee presents a health risk to others in any shared work environment. If one employee becomes infected, he can quickly spread the virus to those working nearby. As coworkers often share the same health insurance plan, a single insurance company will pay a substantial part of the cumulative treatment costs. A single employer will deal with the potential for increased premiums.
The nonprofit, FAIR Health, tracks healthcare costs nationwide. They determined the following:
- The average amount charged for a COVID hospital stay is $74,591.
- The average amount charged for a complex COVID hospitalization is $317,810.
Health insurance companies ultimately pay a substantial portion of these charges. To remain solvent, they pass some of the costs to their insureds as increased premiums. Employers absorb their share of these increases, but employees must pay their share.
Minimizing COVID-19 moral hazards
When an employee refuses to minimize the potential for insured losses, insurers sometimes see the situation as a moral hazard. Moral hazards usually exist when a person considers an adverse situation as a means of financial gain. For example, COVID-related moral hazards often occur because employees see no potential for personal financial loss due to their anti-vax response.
While surcharges won’t necessarily eliminate an individual’s risky behavior, they will eventually feel the financial pinch. Nevertheless, this strategy motivates some employees to get their shot.
Are Surcharges Legal?
The short answer is yes. On October 21, 2020, the U.S. Department of Labor issued a FAQ addressing surcharges and other healthcare issues on behalf of multiple government agencies. The National Law Review article, Employer Vaccine Surcharges—Yes, You Can! Provides a brief analysis that clarifies the DOL’s position.
Both incentives and surcharges are legal when used “…as an activity-only health-contingent wellness program…” or to promote health in general. The guidelines restrict surcharges to 30% of the cost of “employee-only coverage.” Employers must give employees an annual opportunity to qualify for an alternative plan.
Contact Health Consultants Group
Contact us for more information if you’re considering a surcharge for vaccine non-compliant employees. You can reach us at (800) 367-2482 or visit our contact page.