Will Unvaccinated People Have to Pay More for Health Insurance?

As the Delta variant continues to drive a surge in COVID-19 cases, some corporations are considering whether to charge unvaccinated workers more for their health insurance.

More employers have imposed vaccine mandates after Pfizer’s COVID-19 vaccine, Comirnaty, received full approval from the Food and Drug Administration (FDA) on Monday.

Unvaccinated employees are more at risk of being severely ill from COVID-19, which can lead to costly hospitalizations and antibody treatments. Since most health insurers have phased out COVID-19 cost-sharing waivers, the financial burden for treatment may be shifted back to the patients and their employers.

Most Insurers Ended Waivers for COVID-19 Treatment

In 2020, before vaccines were widely available in the United States, most private insurers waived out-of-pocket costs if their plan enrollees were hospitalized for COVID-19. While not required by law, 88% of private health insurers offered that benefit, according to Kaiser Family Foundation (KFF).

But as soon as COVID-19 vaccines became available to the general public, insurance companies were less likely to assume these costs.

A recent KFF survey found that nearly three-quarters of insurers have reverted to normal cost-sharing practices. People who are hospitalized for COVID-19⁠—most of whom are ⁠⁠unvaccinated—may face hefty medical bills after receiving treatment.

Marcus Dillender, PhD, assistant professor in the Division of Health Policy and Administration at the University of Illinois at Chicago’s School of Public Health, tells Verywell that “insurers aren’t obligated to waive cost-sharing because there’s a vaccine.”

“There’s not as much sympathy for people that have these big costs when they didn’t take the precautions to deal with it, and insurers want to encourage people to get vaccinated,” he says.

A KFF study found that the cost of COVID-19 hospitalization is, on average, about $20,000. Per the analysis, there were more than 110,000 preventable COVID-19 hospitalizations among unvaccinated individuals in June and July, costing the U.S. health system a total of some $2.3 billion.

Can Employers Increase Health Insurance Premiums?

Employers that have a large group health plan may bear the brunt of the insurance cost if their employees were hospitalized with COVID-19. For small group insurance, premiums for the whole company could be subject to increases for the next year.

“When an employee doesn’t get vaccinated, they have a much larger chance of being hospitalized or having some serious COVID symptoms that are costly,” Dillender says. “That cost is going to be passed on to the employer—to the employer’s insurance—and that’s going to raise premiums for everybody.”

Additionally, employers who use group health insurance plans may pay all or just a portion of the premium cost. They can choose how much of that cost to pass off to employees and may adjust it as insurance costs fluctuate.

But can employers really increase health insurance premiums specifically for unvaccinated people? The short answer is no.

What they can do is implement incentives and surcharges through company wellness programs, as long as they comply with nondiscrimination rules, according to the Society for Human Resource Management.

Many employers have wellness programs which encourage people to adopt healthy lifestyle practices, like offering gym memberships or a reduction on their insurance premiums if they receive a physical every year. According to the Equal Employment Opportunity Commission, these programs must be voluntary, though there is some controversy about what that means.

Louise Norris, a health insurance writer at Verywell, says companies must closely monitor their wellness programs to ensure they are non-discriminatory. It’s possible, she says, that they may offer insurance cost reductions for people who are vaccinated, like lower monthly premiums or discounts on deductibles.

Health insurance plans, on the other hand, are regulated by several rules that make it difficult for insurers to charge different premiums based on health status factors.

Less than 30 years ago, insurance companies or self-insured employers could charge higher premiums or refuse coverage to people with certain health characteristics, like having high Body Mass Index (BMI) or high cholesterol.

Since the passage of Health Insurance Portability and Accountability Act (HIPAA) in 1996, insurers may not discriminate against individuals for plan eligibility, premiums or coverage based on a health-related factor. The passage of the Affordable Care Act (ACA) in 2009 went even further: Insurers cannot vary premiums based on health status, gender, race, disability, among other factors.

Norris says that it would be hard for insurers to get around these legal regulations to target unvaccinated employees for higher premiums with “the possible exception of a carefully designed wellness program surcharge.”

Historically, the one exception to nondiscrimination rules is the case of smokers. Under the ACA, individual and small group insurers can legally charge higher rates for smokers than for non-smokers as a way to disincentivize smoking. Insurers can thus only adjust premiums based on geographic location, age, family size, and tobacco use.

Debating the Ethics of Premium Hikes

In a New York Times op-ed, Kaiser Health News editor-in-chief Elisabeth Rosenthal and Stanford lecturer Glenn Kramon argued that unvaccinated people should pay more for insurance. Like smokers or reckless drivers, they said, people who choose to remain unvaccinated are putting others around them at risk.

“If people decide not to get vaccinated and contract bad cases of COVID, they are not only exposing others in their workplace or neighborhoods; the tens or hundreds of thousands spent on their care could mean higher premiums for others as well in their insurance plans next year,” Rosenthal and Kramon wrote.

While the authors said that higher insurance premiums may push unvaccinated people to finally get the shot, others saw this argument as a slippery slope.

Norris, who has been involved in the insurance industry for more than 20 years, recalls a time when some people were unable to get healthcare coverage due to their BMI and other factors. That disheartening memory, she says, is enough to urge caution when considering adjustments to premiums and coverage eligibility.

“Do we really want a population of unvaccinated people who are also less likely to have health coverage, which means they’re less likely to seek care if they need it? That probably means they’re more likely to just be out in the community spreading COVID to everybody else,” Norris says. “If you look at it from like that big picture, it probably makes overall public health worse in the long run.”

“By all means, use other incentives,” she says. “Use every tool in the book that’s not related to people’s health coverage.”

There are other concerns, too. Research shows that people of a lower socioeconomic status are less likely to be vaccinated. If these people must bear a higher financial burden for getting sick, it could drive greater disparities, Dillender adds.

“Subsidizing employees’ health insurance at different amounts based on vaccination status is one way that employers can support a vaccine effort,” Dillender says. “But there are plenty of other ways too, like giving people time off to get vaccinated or to recover from being vaccinated, or bringing somebody on to on site to give them vaccines.”

This article was updated on August 26, 2021 to clarify details on wellness programs in group health plans.

The information in this article is current as of the date listed, which means newer information may be available when you read this. For the most recent updates on COVID-19, visit our coronavirus news page.