How Employee Vaccination Status Impacts Company Insurance Policies

Brian O’Connell


November 24, 2021

A row of $100 bills with a COVID-19 vaccination card peeking out between them.

The cost of COVID-related medical care is skyrocketing. According to industry figures, COVID hospitalizations cost $42,200 per patient. Unvaccinated Americans, who comprise approximately 95% of all cases of COVID-related hospital treatments and death, are a particular thorny issues as the pandemic rolls on. Data from the Kaiser Family Foundation and Peterson Center on Healthcare showed that the cost of treating the unvaccinated hit $5.7 billion over a recent 90-day period.

With so many lives and so much money on the line, health care insurers and employers are taking a harder line on vaccinations.  In short, unvaccinated employees may need to prepare to pay more of their own health care costs. "Employers have a duty to minimize enterprise financial risk and ensure a safe and healthy working environment for its employees, thus we’re seeing insurance coverage adjustment considerations based on the COVID-19 pandemic,” said Faisal Khan, senior legal counsel and hospitals and health systems practice lead at Nixon Gwilt Law in Cleveland.

Company Mandates

In August, Delta Airlines declared that, as of November 1, 2021, any unvaccinated employee will see their health care insurance premium rise by $200 per month. Additionally, Delta decided to limit the sick days unvaccinated staffers can receive and now require those same employees to take a COVID test every week until they are vaccinated.

In a company statement, Delta CEO Ed Bastion said that high expenses associated with COVID hospitalizations forced the company’s hand. "The average hospital stay for COVID-19 has cost Delta $50,000 per person," the memo noted. "This surcharge will be necessary to address the financial risk the decision to not vaccinate is creating for our company." Bastion also said that Delta is now on a mission to get “as close to 100% of employees vaccinated.”

Delta is hardly alone. Tyson Foods, United Airlines, CNN, many U.S. federal government agencies, and the U.S. military are also mandating COVID vaccination for employees. “With rapidly rising COVID-19 case counts of contagious, dangerous variants leading to increasing rates of severe illness and hospitalization among the U.S. unvaccinated population, this is the right time to take the next step to ensure a fully vaccinated workforce,” said Dr. Claudia Coplein, Tyson’s chief medical officer.

Experts say that enforcing safety measures is fine. Most companies, after all, has a fire safety protocol and specific attendance rules when bad weather hits. But with the vaccination mandates, companies are in uncharted territory. Still, companies that have rolled out enforceable COVID vaccination mandates for their employees seem okay with the process, and the results.

“We mandated that all of our employees had to be fully vaccinated, particularly as many of them work in our retail stores or provide on-site event activation gifting experiences on behalf of our brand,” said Will Bauer, owner at Royce New York, a handcrafted American accessories brand.  “That’s especially the case especially as the pandemic has had such a dire effect on our business,” he said. “So far, we’re pleased with the ancillary benefit of not having an impact on our health insurance policy for our employees.”

Company Insurance and COVID Vaccines

While companies and insurers deal with the COVID vaccine issue, there are some “knowns” that corporate managers can sort out while the “unknowns” emerge. Here are the factors that matter most to companies struggling with vaccine-related issues in key areas like cost and safety:

Cost: High COVID care costs are a huge driver of employer-mandated vaccinations. “The cost of COVID-related insurance is increasing across the board,” said Leslie Slay, employee benefits specialist at Woodruff Sawyer in San Clemente, California. “The average cost of a COVID claim is $60,000 from start to finish and the cost of being on a ventilator for a few weeks runs $200,000 to $300,000. Those costs are being dispersed across all insurance recipients.”

The financial risk analysis of company insurance: The health care costs per patient associated with COVID-19 cases range from nominal (for individuals who do not require medical attention) to extremely high (for individuals requiring hospital stays, and COVID Long-Haul Syndrome). “Companies with unvaccinated workers are being forced to reassess their financial risk tolerance, vis-a-vis insurance, to account for increased coverage expenditures,” Khan said.

Policy and enforcement models: Vaccination status is causing companies, employees and insurers (including self-funded plans and captive insurance) to adjust coverage costs. To minimize financial risk, employers are evaluating "change behavior" type-actions to lower potential financial exposure. “For example, companies may want to offer incentives to get the workforce fully vaccinated (e.g., positive incentives such as public health educational training sessions, or negative incentives such as a premium increase or surcharge),” Kahn said.

Ability to change financial burdens: Absent collective bargaining requirements for unionized workers and acceptance of potential discrimination risk, employers can generally increase policy rates for unvaccinated workers. Whether or not a policy increase is the right thing to do depends on the company’s culture.

“Companies that have as part of its mission or culture to be a community leader will likely have more incentive to require vaccinations for the entire workforce in furtherance of contributing to local public health initiatives and concerns,” Khan noted. “Companies that have implemented diversity, equity, and inclusion (DEI) initiatives and/or DEI into its culture may have a tougher time due to diligence process in making the determination to mandate vaccines for the entire workforce in recognition of individual personal choice.”

Limits on mandates: The entire COVID vaccination system has been a little haphazard to date, slowing efforts to get staffers vaccinated on the job. “COVID vaccination started as a free government sponsored program and insurers don’t necessarily know who’s been vaxxed and who hasn’t and there's no national repository for that information,” Slay said. “So many protections have been built into health and employment law to protect employees from discrimination and those laws haven't changed. And because revealing your vax status is voluntary, you don’t have to, by law, to reveal that information.”

That said, it is a public health crisis, Slay said. “After all, a top priority for companies is to keep employees safe,” she noted. “It’s going to be a challenge to put the burden of proving who and who isn’t vaxxed on employers.”

Brian O’Connell is senior analyst at