Here's how surcharges applied to health plan premiums may be impacted by ACA requirements:

Under the ACA, the employee premium cost for your lowest-cost plan that meets minimum value must meet affordability guidelines.
In 2021, affordability is achieved when an employee's cost for health insurance benefits is no more than 9.83% of that employee's household income. This percent is adjusted each year and safe harbors apply.
Under current ACA guidelines, a premium surcharge for choosing to be unvaccinated against COVID-19 could be applied to the cost of your organization's lowest-cost health plan.
If the cost including the surcharge renders the plan as unaffordable, and the employee goes to the exchange and receives a premium tax credit, the employer may be subject to Penalty B. The $4,060 penalty per year can be multiplied by the total number of full-time employees who did not have an offer of affordable coverage and who also receive a premium tax credit.

Employers may be familiar with or have a tobacco surcharge – a common penalty leveraged by employers to help mitigate health care costs resulting from tobacco use – which is a big exception to the above rules. Typically, smokers face health plan premium surcharges if they fail to quit using tobacco products and if they fail to comply with reasonable alternatives, such as completing a tobacco cessation program. Under the ACA, if the employee has cost-free tobacco cessation services, the surcharge is not applied in the affordability calculation.

Instant Insights /

Employers' premium surcharges for unvaccinated employees could result in ACA penalties

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