Delta Airlines garnered headlines this week for its new policy charging unvaccinated employees an extra $200 per month in health plan premiums. In making the announcement, Delta’s CEO describes the step as necessary to protect employees and customers from COVID’s Delta variant (which he notably refers to as “the B.1.617.2 variant”). However, while it may be a legal move, Delta’s new premium surcharge has the potential to backfire. It is likely to price some employees out of coverage entirely, cutting off their access to family physicians and other primary care providers who can be trusted sources of information about the vaccine’s benefits.
The national campaign to get people vaccinated could not be more urgent, and employers have a critical role to play. My own employer, Georgetown University, has required that all students, faculty and staff be vaccinated before returning to campus. Those who do not get vaccinated for medical or religious reasons must submit to regular testing. Many major employers, such as Disney, Goldman Sachs, Citigroup have imposed similar mandates, and more are expected to do so now that the FDA has given the Pfizer vaccine full approval.
Delta Airlines’ leadership chose not to impose such a mandate but instead will tie vaccination status to the premiums its employees pay for health insurance coverage. Without a doubt, unvaccinated employees not only pose a health risk to their colleagues and customers but also a financial risk to the company’s self-funded health plan. Delta Airlines estimates that a single hospitalization for a COVID-19 patient costs its plan on average $50,000. The costs for these COVID patients must be borne by the company and all of its employees, whether vaccinated or not.
However, we know from past experience with programs that tie premiums to certain health outcomes, such as smoking cessation or weight loss, that they do little change people’s behavior. Instead, they shift more financial risk onto those who fail to achieve the desired outcome and, particularly for lower-income individuals, may cause them to discontinue coverage entirely.
Wait – Didn’t the Affordable Care Act Prohibit Premium Surcharges Based on Health Issues?
It was actually a 1996 federal law – the Health Insurance Portability and Accountability Act (HIPAA) – that prohibited employers from charging individual employees a higher premium based on their health status. The Affordable Care Act (ACA) expanded that protection to people purchasing individual insurance policies. However, the ACA continued – and even expanded – a loophole for employer plans via so-called “workplace wellness” programs.
While HIPAA generally prohibits employer plans from discriminating against plan enrollees on the basis of “any health status-related factor,” there is an exception. Employers may offer employees premium or cost-sharing incentives for participation in – or adherence to – a wellness program. Under federal rules published in 2006, the incentive (or penalty) could be up to 20 percent of the cost of coverage. The ACA expanded on the 2006 rules by allowing surcharges of up to 30 percent of the cost of coverage. The Obama administration implemented this expansion via regulation in 2013.
Under the federal rules, workplace wellness programs can be “participatory” or “health-contingent.” A participatory program provides incentives for workers to participate in a program, such as nutrition counseling or an exercise plan, but the incentive cannot be based on the worker satisfying a particular standard or meeting a particular health target. With a health-contingent program, plan participants could face a premium or cost-sharing surcharge if they fail to meet a standard or target, such as quitting smoking or achieving a specified body mass index (BMI). The rules give employers very wide latitude with respect to participatory wellness programs, but they must meet five tests for health contingent programs:
- Individuals must be given an opportunity to qualify for the incentive at least once per year;
- The total reward or penalty cannot exceed 30 percent of the total cost of employee-only coverage (including the amount of the employer contribution). If the program is designed to reduce tobacco use, the reward cannot exceed 50 percent of the total cost of coverage);
- The program must be “reasonably designed” to promote health or prevent disease;
- Individuals who cannot meet the target or standard due to a medical condition must be provided a reasonable alternative standard (or have the standard waived);
- Materials describing the wellness program must disclose the availability of a reasonable alternative standard (or opportunity to waive the standard).
Without details it is not clear whether Delta’s program meets all these tests, but meeting them is generally not difficult. Incentivizing workers to be vaccinated clearly promotes health or prevents disease, and so long as the surcharge is within 30 percent of the total cost of the employee’s coverage and if workers who, for medical reasons cannot receive the vaccine are exempted, the program likely complies with federal law.
Delta Airline’s Program May be Legal, but it’s not Good Policy
Imposing premium surcharges on unvaccinated workers under HIPAA’s workplace wellness exception may be legal, but it’s far from clear that it will be effective. Workplace wellness programs are popular among employers – 81 percent offer workers one or more wellness programs. Despite their popularity, there is little evidence they reduce costs or promote health. For example, a comprehensive study of employer weight loss programs concluded that “No corporate weight control program has ever reported savings or even sustained weight loss using valid metrics across a sizable population for 2 years or more.” Similarly, initiatives that tie tobacco use to higher premiums have been shown to do nothing to reduce smoking, but do result in pricing people out of coverage.
Of course, traditional wellness programs are not a perfect analogy here. There’s a big difference between a co-worker who can’t lose weight or quit smoking and a co-worker who spreads a deadly disease because they’re unvaccinated. However, there is zero evidence that tying vaccination status to premiums will change people’s minds and prompt them to get the vaccine. At the same time, there is evidence that family physicians and other primary care providers are perceived as trusted messengers of information about the risks and benefits of the vaccine. But those without health insurance generally lack access to such providers.
I’m as angry as anyone about the willful ignorance of many unvaccinated individuals and the high costs they impose on the rest of us. But there is little evidence that making health coverage unaffordable to unvaccinated individuals will change their minds. If anything, it cuts off their access to a source of information that could.