As employers continue to consider different options for increasing vaccination rates among their employee populations, some, such as Delta Airlines, are implementing healthcare plan surcharges for unvaccinated employees. Similar to employer vaccine mandates, while implementing healthcare plan surcharges for unvaccinated employees is not inherently unlawful, there are certain important legal implications employers must consider.
Federal law prohibits employers and insurers from implementing surcharges on people with pre-existing health conditions. Employers should therefore be aware that vaccine surcharges can only be implemented through wellness programs as incentives.
Such wellness programs must be voluntary, and under HIPAA any incentive – or in this case surcharge penalty for being unvaccinated – cannot exceed 30 percent of an employee's health insurance premium.
Whether there are any limits to vaccine incentives under the Americans with Disabilities Act remains an open question. In 2016, the EEOC released wellness program incentive regulations that aligned the ADA with HIPAA and similarly set a 30 percent threshold. However, such rules were later invalidated by a federal judge in 2019, and replacement regulations proposed under the Trump administration have been on hold since President Biden took office.
In guidance released earlier this year, the EEOC explicitly noted that incentives for employees to voluntarily provide documentation or confirmation that they have received a vaccination are permissible under the ADA and other anti-discrimination laws, but declined to clarify whether there was any limit to such incentives in order for them to still be considered "voluntary" as required under the ADA.
Further, similar to vaccine mandates, employers must be aware of any lawful religious and/or disability exemptions under the American Disabilities Act that prevent certain employees from getting vaccinated, and accordingly engage in a reasonable accommodation process under the ADA for such employees.
Relatedly, because any incentive must be available to all similarly situated individuals, employers must offer a reasonable alternative standard to unvaccinated employees. In this case, that could mean a COVID-19 testing program conducted on a regular basis, or perhaps completion of a vaccine education course. In either case, employers may be faced with difficult administrative and compliance challenges.
Finally, implementing vaccine surcharges could implicate the Fair Labor Standards Act, particularly for lower-income employees. Employers must be careful to ensure that any vaccine surcharge would not have the cumulative effect of bringing any employee under the minimum wage in violation of the FLSA.