Will Tinkering With Premiums Make Beneficiaries Happier?

John A. Marcille

Karl Marx, someone not often quoted in this magazine, once outlined how communism should work: “From each according to his abilities, to each according to his needs.” This from a man not known for his succinctness. Perhaps we should give him the benefit of the doubt because, after all, he had no way of knowing just how much misery would be visited upon the world by people bending his words to their own nefarious ends.

Could a benign variation of this method of operation be coming to health coverage? Some companies in the Philadelphia area have begun to link how much an employee contributes to the benefits package to how much an employee takes home. In other words, those who make more pay more.

“Should a worker making $30,000 a year contribute the same amount toward health insurance as a manager making $300,000?” asks the Philadelphia Inquirer. “While the premium for both is the same — nearly $12,000 for family coverage — a $3,000 contribution has a significantly different impact on them. To address that problem, some companies are choosing to tie worker contributions toward premiums to how much they earn.”

Judy Lynch, vice president for U.S. benefits at GlaxoSmithKline, one company that is using a salary-based contribution method, tells the newspaper that “We have five different bands, and employee contributions range from a low of $22 a month to a high of $202…. The overall employee contribution is still around 10 percent of our costs. We just distribute it differently.” Experts say that such schemes are complex and often difficult to administer. Still, we may soon see other imaginative tinkering with the employer-based system.

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