A pitch for socializing corporate health insurance premiums

High-salaried workers may need to pay more so lower-wage workers pay less

LAST WEEKEND I attended the memorial service for Rob Restuccia, a longtime and pioneering advocate for a more just and consumer responsive health care system in Massachusetts, and really across the US.

For many, and for me since I moved to Massachusetts in 1992,  Rob served as a teacher, mentor, inspirational leader, and advisor on how to advance health policy related to access and affordability of health care services for all—but with special worry and attention for the poor and other vulnerable groups.

So one way for me to honor his memory is to write about health insurance cost sharing between employers and employees, something I know Rob cared greatly about. The growing reality, highlighted even this past week at a meeting of the Health Policy Commission, is that those most pressed with health care affordability challenges  are not those on Medicaid, but rather those who have a private insurance card in their pocket with incomes just above the Medicaid level of eligibility—generally those whose family income levels range between 139 percent and 300 percent of poverty of the federal poverty line.

While I have written in the past about the health insurance affordability challenges created by the usual suspects: doctors, hospitals, insurers, drug and device companies, I have not written much about employer responsibility for some of the “experience of unaffordability” that people face.

I will use my own employer, Tufts University, as an example.

The university currently offers three health plan choices which Tufts workers can choose to purchase on either an individual, worker-plus-spouse, or family coverage basis.  While Tufts does provide an affordable single person premium for its higher deductible option ($2,000 annually) where a worker pays only about $100 a month, or about 16 percent of the premium cost, its family health insurance premiums ask employees to pay 38 percent of the cost across all three plan options. Those cost-sharing amounts range from about $660 a month for the higher deductible plan to as much as $877 per month for the plan, which has no provider tiering and the lowest annual deductible.  A middle-priced-choice tiered option, which charges higher cost sharing at time of service for care at Massachusetts General Hospital, Brigham and Women’s Hospital, or Children’s Hospital and their physicians, costs employees about $800 per month.

For lower-wage employees at Tufts, cost is a huge issue. Even the least expensive family option, which can have significant cost-sharing including deductibles ($2,000 individual and $4,000 family annual deductible), would require workers to pay nearly $8,000 in annual premiums. If they choose a plan with less cost sharing (perhaps because someone in the family needs regular care), the cost rises to almost $10,000 per year—and that is just for premiums. Do the math. For workers whose annual salary is under $40,000 a year, somewhere between 20 to 35 percent of their wages would go to pay health insurance premiums.

Tufts, like most employers in the state, does not vary the premium based on wage level. The university asks full-time faculty (like me), whose annual salaries are often $150,000 or more, to pay the same $10,000-per-year in family health insurance premiums when we chose coverage through work. The proportionate financial burden on faculty or administrative staff members in this salary range is much less.

The university should change its policy, adjusting premium levels based on income.

Tufts should decide that workers below a certain annualized full-time wage—say $50,000 a year—should be offered a family health insurance premium that is much lower than current levels.  One way to make that happen would be for the university to put more money into the system, or it could shift more of the costs on to higher-paid workers.

The recent median wage level at Tufts is about $70,000 a year.  As an example of what could be done, let’s say the university reduces monthly premiums for lower-wage workers by subtracting $10 from the premium for every $1,000 of wage under $70,000. For someone earning $50,000 a year, their monthly premium would drop by $200 ($10 multiplied by 20).

If Tufts needs to avoid increasing its own health plan contributions,  it could decide to ask workers who earn more than $140,000 per year to pay $10 more a month in premiums for each $1,000 of income over $140,000, up to, say, a maximum level of $160,000. The exact levels for implementing such a scheme could be better assessed by those who have access to the actual wage distributions across the university.

The net effect is that workers earning $50,000 or less a year and choosing the middle-cost tiered family plan would pay $7,200 rather than the current $9,600 a year. Those earning between $50,000 and $70,000 per year would pay an amount in between. Those paid between $70,000 and $140,000 per year would pay the current $9,600 annual premium.   People earning $160,000 or more would pay $12,000 per year and those earning $140,000 to $160,000 would pay between $9,600 and $12,000.

Some might argue that basing premiums on a Tufts worker’s income level is unfair because it fails to take into account earnings of other members of the family. The concern is about unjustly giving a financial break to someone who is being paid a lower wage at Tufts but could have a higher-earning spouse.  Others question whether it makes sense to create a more complex scheme when at the end of the effort the $50,000-and-under-workers are still likely to find the annual $7,200 per year premium payment unaffordable, and may not pick up the coverage.

I tend to find these arguments more of an excuse to protect the status quo or an attempt to protect higher-wage workers from paying more.

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A scheme that incorporates aspects of a sliding scale for premiums is the right thing for Tufts, and really all larger employers with sufficient wage variability among their employees to do. In the absence of a single-payer system that is funded by a progressive system of taxation, a private employment-based insurance scheme that more fairly ties an employee’s share of premiums to their wages would be something that, if Rob was still here, he would say right-on!

Paul A. Hattis is an associate professor at Tufts University Medical School.