Employers are struggling to get 100% of their workforce vaccinated. A few are looking at rewards for vaccination such as extra days off. Other employers are looking to penalize their unvaccinated employees such as having them pay an extra fee on their health insurance premium. If a surcharge is something you are considering, there is another complication you may not have thought about - the affordability of your healthcare plan according to the Affordable Care Act (ACA).
As you probably know, ACA requires Applicable Large Employers (ALEs) to offer affordable health care benefits to eligible employees or potentially, pay a penalty. For ALEs, this means providing health insurance for less than 9.83% of an employee’s household income for 2021, and 9.61% for 2022. Within the ACA law, there are very specific rules governing the design of wellness programs, especially regarding incentives and penalties (premium surcharges). The big exception is the tobacco surcharge. Under the ACA, if the employee has cost-free tobacco cessation services, the surcharge is not applied in the affordability calculation.
Will Vaccine Surcharges Be Treated the Same?
While there is an exception for tobacco, an FAQ published on October 4, 2021 from U.S. Departments of Labor, Health and Human Services, and Treasury confirms that at this time premium surcharges for unvaccinated employees is not an exception. Any surcharges will be incorporated when assessing affordability. One way employers might navigate this rule differently is by providing incentives for vaccinated employees instead of penalties for unvaccinated individuals.
“A penalty of $2,750 (for 2022) per full-time employee minus the first 30 will be incurred if the employer fails to offer minimum essential coverage to 95 percent of its full-time employees and their dependents, and any full-time employee obtains coverage on the exchange.” - SHRM
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