should EE med rate vary by salary?

Caroliso

I found myself in a conversation about increasing health plan rates that get passed onto EEs and dwindling salary increases year to year. Someone posed an idea I'd never heard before, wonder if you all have.

The proposal was to graduate EE health plan contribution rates according to salary, so that those with lower salaries paid the lowest EE contributions and those with higher salaries paid the most.

I can think of HR reasons why I wouldn't want to do such a thing (e.g. how fair is it to assume that someone who is higher paid should or could absorb more than their fair share of costs?), but I wondered a) would this be legal and b) if yes, has anyone heard of a system like this being implemented?

Maybe it's no different than unionized EEs in a company negotiating a particular salary increase, health plan contribution or other benefit that doesn't apply to non-unionized workers, but not having been in that environment I'm not sure how that differential is managed.

Thoughts?

Dutch2

We do something similar to this. The ee medical deductibles and total out of pocket expenses are based on wages. We have a three tier program. The first tier has a $250 deductible, the second a $750 deductible and the third a $1,200 deductible. We have used this style of program for a few years now and it went over very well with our ee's.

Caroliso

That's interesting, Dutch. Can you say a little bit more about the rationale that was used when it was rolled out?

NaeNae55

My hubby works for the state of Kansas and they have been doing this for years. They set a baseline salary. If you earn more than the baseline, you pay a higher premium. If you earn less, you pay a smaller premium.

Coverage and deductibles are the same; it is only the premium that is changed. Of course, either amount is not very much for employee only coverage, so I doubt if the difference is enough to make anyone sit up and scream. (They pay nothing on dependent coverage.)

Nae

Caroliso

That's helpful, Nae. I wonder, if the difference isn't that much, why they do it. Is it primarily for PR value, do you think?

I wish we could fully cover dependents, it must be a powerful recruitment tool.....

Toto

To expand on Nae’s comments here is a VERY brief overview. Full time: state covers 95% of single & 45% for dependent. There are 3 levels: EEs less than $27,000, $27,000 to $47,000, more than $47,000. Then there is a choice of EE only, EE & spouse, EE & children, EE & family. Depending on the provider EE chooses, the EE can pay an additional $16 to $25 a month between salary tiers. Hope that helps.

By the way, Caroliso, back in Aug & Sep I had asked a couple questions about your original posting in Apr, “My Pet is a Service Animal”. I am still interested in learning if/how this was resolved.

Caroliso

Toto, I started to write a longer response but I should probably do it in the proper thread. Suffice to say I got a note from a therapist and now the ball is in my court, and it's fallen way down on my to-do list unfortunately.

Indiana Catbert

My company doesn't vary premiums based on income, but does have higher annual deductibles and out of pocket maximums. The differing deductibles shown below are based on base salary only (in-network/out-of-network deductibles shown):

Up to $30,000 150/300
30,001 - 60,000 200/400
60,001 - 150,000 300/600
150,000 + 400/800

We self insure. The logic used is that higher income employees can afford higher deductibles if they use their insurance. Otherwise, everyone pays the same in insurance premiums. I have mixed emotions about the practice.

marc

Thinly disquised socialism if you ask me.

This is just another way for one group to subsidize another. Group plans already have the healthy folks subsidizing those that have higher profile health conditions. When you think about it, having the higher paids subsidize the lower paids is sort of undoing the healthy subsidizing the less healthy.

One of the assumptions is that higher paids can be there just due to seniority; and seniority means older; and older means a higher liklihood of health problems.

Normal group plans have this dynamic built in - higher health cost members are subsidized by lower health cost members. Now lets reverse that by having higher paid members subsidize lower paid members.

Seems complicated.

jmcaa

Our company thought about doing this, but decided against it. I would have been in the middle salary group, so I probably would have paid about the same as now.

I used the example of a lower paid ee and a higher paid ee going to buy a dress at Wal-Mart -- why should the higher paid ee have to pay more for the exact same dress? Just doesn't make sense to me!

Caroliso

Marc, I also have mixed feelings about the idea. Where I get stuck is the assumption that more highly paid folks have more discretionary income and therefore should pay higher rates. I know plenty of people at upper levels of income (for us, anyway) who high expenses not because they are paying for a new boat or vacation home, but because they are paying for multiple kids to go college, medical services for a family member who has special needs, supporting a spouse in staying home to raise the kids, etc.

You do raise an interesting point about subsidizing of sick vs. well and high earners vs. lower earners.

marc

I still think this sort of thing is a thinly disguised re-distribution of wealth.

It is real easy for folks to make decisions that affect their lives and then ask others to support those decisions. People who made sacrifices to get a better education (and therefore a higher paying job), or who have taken risks and then reaped rewards, should not have to subsidize those folks that went another direction.

I don't even care if the person with the money is blowing pockets full of money on chocolate or boats or just flying around the world. It's their money and time and in America, it means they have the freedom to do what they want with the money (after tax of course). Just don't force them to take care of those with less. If they want to do those things - fine, it's still their money.