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With New Vaccine Mandate Rules for 100+ Employees, Can Smaller Employers Get Tough Too?

November 5, 2021

By Michael Burns, courtesy of SBAM Approved Partner ASE

This article was revised to reflect Vaccine Mandate Rules released by the White House on November 4, 2021.

As larger employers comply with Occupational Safety and Health Agency’s (OSHA) Emergency Temporary Standards (ETS), many employers are looking to make other constructive changes to their health and safety policies. As a lever to promote voluntary vaccination, some employers have implemented health care “surcharges” on unvaccinated workers.

Delta Airlines announced this practice starting this month. Delta Airlines will charge unvaccinated employees an additional $200/month on top of their current insurance co-pay. Timing of this new charge was planned to match up with the annual open enrollment periods in its health plan(s) – a move to make this new charge easier to implement with its insurers.

The practice of setting up a penalty cost for unhealthy practices is not really new. Several years ago, some employers increased health care cost coverage for employees who smoke.

Under the new OSHA safety rule, smaller employers (those under 100 employees in size) will not be required to mandate employee vaccination. One draconian approach to enforcing a vaccine mandate that employers under 100 in size can take is requiring employee vaccinations under threat of discharge. Of course, this is provided the employee is not protected under an American with Disabilities Act or Religious exemption. As a second, less punitive approach to enforcement, an employer may want to consider implementing a health care cost increase instead.

This practice has its own legal compliance considerations. The Health Insurance Portability and Accountability Act (HIPAA) limits COVID-19 surcharges to 30% of the total cost of coverage. HIPAA also requires an employer “offer a reasonable alternative to employees for whom it is unreasonably difficult [to receive a vaccine] due to medical conditions.” These may result from other medical conditions making the COVID-19 vaccine not medically advisable.

Employers using the premium increase approach should also be careful to not elicit an Affordable Care Act penalty that could arise under the employer mandate rules. These penalties could cause the offer of coverage to not meet a rate-of-pay affordability safe harbor if in place. Check with your benefits provider on that.

And if employees are in a union, the rule against unilateral implementation of any terms or conditions of employment compels employers to negotiate any changes to a benefit.

Employers can legally implement some pretty hefty penalties to promote employee vaccination.

What about positive employer-employee relations instead?

Employers should keep in mind that it’s still an employee market for jobs right now. Employers that are hurting for workers may want to avoid giving current employees another reason to “seek life elsewhere.” Employers are confronted with the dual challenges of keeping a safe, healthy, and productive workplace and also keeping employees with different concerns and viewpoints about vaccination safety reasonably happy, yet safe. It is recommended if an employer does implement a health insurance surcharge for remaining unvaccinated, the employer gives employees time to get their vaccines before implementation of the penalty. Communication is always important.

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