Amid widespread vaccine rollout and the recent full FDA authorization of the Pfizer (PFE) COVID-19 vaccine, many employers are now debating whether to mandate vaccinations among their employees and whether to financially deter unvaccinated individuals.
"The average hospital stay for COVID-19 has cost Delta $50,000 per person," CEO Ed Bastian wrote in a memo. "This surcharge will be necessary to address the financial risk the decision to not vaccinate is creating for our company. In recent weeks since the rise of the B.1.617.2 variant, all Delta employees who have been hospitalized with COVID were not fully vaccinated."
Elizabeth Mitchell, CEO of Purchaser Business Group on Health, told Yahoo Finance (video above) that surcharges for unvaccinated employees are "very much like smoking surcharges, and it is not unreasonable. People can choose to smoke. They can choose to be unvaccinated. But that comes with additional costs for health care, and companies are paying those costs. Families are paying those costs because they hit everybody’s premiums. So it’s not unreasonable to expect those who are incurring greater costs to actually contribute more.”
Mitchell, whose company is a non-profit coalition that represents nearly 40 private employers and public entities across the U.S. in navigating the purchasing of health care plans, explained that a major part of it is employers wanting to attract and retain talent by keeping their workforce healthy.
Though vaccinations have picked up in the U.S. recently amid the spread of the Delta variant, the rate is still nowhere near herd immunity, which experts predicted to be approximately 75% before the highly contagious variant became dominant in the U.S.
In the meantime, those who remain unvaccinated continue to pose a threat to the health of vulnerable populations and the containment of the virus at large.
“People want to know that they are working in a company where they will be safe,” she said. “And it is an expectation of a growing number of employers that you will be vaccinated to come to work.”
Unvaccinated Americans costing billions of dollars
Aside from wanting to attract and retain talent, another major reason for a surcharge like this is because of the cost of hospitalizations for unvaccinated individuals.
Unvaccinated individuals account for an overwhelming majority of COVID-related hospitalizations: A recent study by the CDC found that between May 1 and July 25, 2021, unvaccinated residents of Los Angeles County in California — the country's most populated county — were 29.2 times more likely to be hospitalized by COVID-19.
And the average cost of a COVID-related hospitalization is roughly $20,000, a recent analysis by the Peterson-KFF Health System Tracker found. Based on these estimates, according to the study, “these largely avoidable hospitalizations” (meaning that most could have been prevented by being vaccinated) have already cost the U.S. health care system $2.3 billion since the beginning of June 2021.
And because of federal guidelines, most of these costs are paid for by insurance providers.
In the case of Delta Airlines, employee health insurance claims are covered by the company since it's self-insured. And the company's surcharge of $200 a month for unvaccinated employees is more of an attempted deterrent than a way to pay those potential bills since it would take more than eight years to reimburse for the hospital bills based on the Peterson-KFF analysis.
“That [cost of paying for COVID-19 hospitalizations] comes out of wages,” Mitchell said. “It comes out of job growth. It comes out of families. So it’s something that employers have to address.”
Consequently, she added, more and more companies are looking to “either encourage or require” vaccination.
Though a company can generally require its employees to be vaccinated, there are some caveats: The company must meet standards under the Americans with Disabilities Act (ADA), and there must be reasonable accommodations for those who cannot get vaccinated due to some type of disability such as a medical condition or “sincerely held” religious belief. Additionally, the requirement can’t be applied in a way that treats employees differently.
A health insurance loophole
After Delta’s announcement, many speculated that the move could be a violation of the Affordable Care Act (ACA), which protects insurance providers from charging people more for pre-existing conditions. In this case, being unvaccinated would be considered a pre-existing condition.
But there is a loophole that is likely the exception with Delta: Wellness programs.
“Under the ACA, insurers are allowed to vary premiums based on a person’s age, location, family size, and smoking status,” Cynthia Cox, vice president at the Kaiser Family Foundation, told Yahoo Finance. “That means they can’t vary premiums based on health or vaccination status.”
However, she added, “employers have a lot of flexibility to design wellness programs with financial incentives so long as they aren’t coercive.”
Wellness programs are typically used to incentivize recipients to reach certain health care goals. (The premiums cannot exceed more than 30% of the total cost of the health care plan.)
Still, these surcharges might be able to make some kind of impact — a new survey of 1,000 participants by Breeze, an insurance technology company, found that 31% of unvaccinated Americans would get the vaccine if they learned their health insurer would raise their premiums because of their status.
The survey also found a stark divide, with respondents equally split on whether or not health insurers should even be imposing these charges.
“There are going to be implementation barriers and challenges, but I do believe employers will find ways to incentivize and encourage and ultimately require vaccination,” Mitchell said. “Like smoking cessation, there were ways to identify additional costs and folks who are incurring them. And again, they want to attract and retain talent. That’s why they offer these very rich benefits. They want employees to be healthy.”
Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at firstname.lastname@example.org.