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With 40% of Americans completely unvaccinated against Covid-19 — blame it on political polarization, virulent disinformation, structural barriers, and more — the number of people infected by SARS-CoV-2 and dying from this disease are surging. The much-maligned health insurance industry, in conjunction with employers, could help reverse this trend by increasing vaccination rates through economic incentives and workplace vaccine access.

In theory, health insurance might be an effective tool to promote Covid-19 vaccination. Insurance generally serves two major economic purposes. First, it spreads the financial risk of foreseeable but unlikely harms (think car accidents, injuries requiring hospitalization, and the like) across a large population. Second, by requiring people who engage in riskier activities such as driving recklessly or smoking to pay higher premiums, it can create an incentive to behave more safely.

This has led some to suggest that increasing health insurance costs for unvaccinated individuals through larger copays and deductibles will increase the vaccination rate.


In general, though, health insurance is a crude tool for influencing behavior. Cost-sharing, in the form of copays and deductibles for health care services, is supposed to encourage people to make better choices about their health care. But the evidence is clear that cost-sharing causes patients to forgo care without regard to whether they need it or not.

We believe that high copays or deductibles for Covid-19 treatment won’t induce many people to get vaccinated. Why? People who underestimate — or disregard — the risks of being infected and being hospitalized will not be moved by the possibility of higher cost sharing if they get sick down the road. Nor will higher cost sharing eliminate any of the structural barriers that hinder vaccination. There are also legal constraints on cost sharing, with federal law barring most health plans from imposing higher cost sharing on, or charging higher premiums to, unvaccinated individuals.


But there are two ways that health insurers and employers can increase the number of Americans who are vaccinated and, in the process, protect people who cannot get vaccinated and reduce the overall severity of the pandemic. One is through workplace wellness programs, the other is through group policy pricing for employer-based health insurance.

Workplace wellness programs offer the most effective health-insurance-based strategy to boost vaccination numbers. Nearly half of all employers (and more than 80% of large employers) offer workplace wellness programs such as the Health Enhancement Program at the University of Connecticut, where we work. Under this program, if we agree to certain preventive services — annual physical exams, cholesterol screening, dental cleanings, and the like — we get a break in our health insurance costs: a $100 per month premium discount and lower cost-sharing.

The logic behind wellness programs is simple: The employer and the insurer pay workers (through lower premiums and cost sharing) to take actions that are good for them. These actions, in turn, could reduce the amount the insurer and the employer will have to pay in future health care claims.

Covid-19 vaccination should be added to wellness program requirements, given the documented benefits of the existing vaccines. This would give plan participants who aren’t vaccinated an incentive — $100 per month, in our case — to get vaccinated. Under federal law, wellness program incentives can be up to 30% of the total cost of the health plan, so vaccination incentives can be larger than the one we have. Delta Air Lines recently announced a $200 per month health insurance premium differential for employees under its wellness plan. Delta employees who are vaccinated will pay a lower premium — $200 a month — than those who are not. As long as Covid-19 vaccination remains a wellness program requirement, the unvaccinated will be forced to pay the higher rate until they are vaccinated.

Importantly, this vaccination bonus (or non-vaccination penalty) is experienced every month, unlike higher copays or deductibles, which kick in only when coverage is actually used. That makes the bonus (or penalty) highly visible. Research in behavioral economics shows that costs like these, which are known as salient costs, are much more effective at changing behavior than those that are harder to see.

There would need to be exemptions, of course, for religious and medical reasons, but wellness programs already have an infrastructure in place to monitor compliance with their requirements.

Health insurers also have another way to encourage vaccination. They can offer premium discounts to employers purchasing health insurance for their employees. Health insurers could reward employers for taking steps to increase their vaccination rates above some number, like 95% (or require unvaccinated people to wear masks and be tested twice a week), by paying a lower premium, which it can pass on to its employees in the form of lower health insurance costs. If the employer does not meet the goal, it pays a higher premium.

This type of premium discount is easily justified. The average hospital cost of a Covid-19 patient is $73,000 and people who are not vaccinated are 29 times more likely to be hospitalized with Covid-19 than those who are. The financial risk of unvaccinated people is real and substantial. Insurers have an additional incentive to reduce premiums for companies that significantly increase their vaccination rates: the more people who are vaccinated, the slower the spread of Covid-19, reducing health care costs in the population at large and thereby benefiting both the health insurance industry and society as a whole.

The group discount approach, however, won’t be as effective as wellness plans at encouraging vaccination. The law and the structure of the health insurance market prevent insurance companies from applying group discounts broadly. Federal law bars insurers from pricing coverage for small employers (those with up to 50 employees) based on employee vaccination status. Also, most employees with an employer-based health plan — about two-thirds — get their coverage through self-funded plans. Under these plans, the employer directly pays its employees’ medical claim costs (using an insurer as a plan administrator), so there is no insurance premium to be discounted.

Nevertheless, tens of millions of employees (and their families) get their health coverage through fully insured employer-based plans. Many of these distribute at least some of the risk of medical claims across a pool of other similar sized employers (typically those with 50 to 300 employees). Insurers could use vaccination rates to sort these employers by risk level and offer premium discounts to those with the lowest risk. Indeed, this is exactly what insurers already do: they compete with each other by figuring out how to estimate and price risks accurately. This gives insurers a leg up on their competition. It also has the side effect of encouraging people and companies to take less risk.

In addition to these two key strategies, we believe that employers and insurers can do one more thing to increase Covid-19 vaccinations: establish workplace vaccination sites. Many employers already offer annual workplace influenza vaccines, with insurers covering the cost of the vaccinations. Setting up a workplace Covid-19 vaccination site would be no different. The combined effect of a financial incentive and ready access to a vaccine could push many of the uninoculated toward vaccination.

As a general policy, we believe that insurance-driven economic incentives are not a great way to solve the problems of the U.S. health care system. Insurance alone cannot overcome structural barriers to health care, cost sharing does a poor job of steering people toward better health care choices, and many people simply do not make enough money to afford the expected cost of their health care, as required by a pure insurance system. We prefer a social solidarity model in which people pay for health insurance based on their ability to do so and have a right to the services they need. Yet even in such a system, there is an important role for incentives to encourage people to get the preventive care they need, like vaccinations, which will lower costs for society as a whole.

Contributions to public health are a classic example of what economists call positive externalities — actions that benefit everyone. Crucially, individuals acting on their own do not have sufficient incentives to undertake such actions. It is hard to imagine a more suitable venue for health-promoting incentives than the Covid-19 vaccine.

James Kwak is a professor of law at the University of Connecticut School of Law, where John Aloysius Cogan Jr. is an associate professor of law and Peter Siegelman is a professor of law.

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