In an effort to meet the affordability requirement of the Affordable Care Act, which kicks in next year and requires that workers spend no more than 9.5% of their income on premiums, more employers are turning to insurance plans in which premiums vary based on a person’s salary, rather than having all workers pay a flat rate. That way, employees who make more money pay bigger premiums.
Some 12% of companies used salary-based premiums in 2012, up from 10% in 2011, according to a study by benefits consultant Mercer. The practice is especially common among large employers, with 20% of companies that have at least 5,000 employees using the strategy last year. A separate survey by the Kaiser Family Foundation found that the approach of varying premium contributions by wage level is more popular in the Northeast, where 9% of companies used the strategy, and in the Midwest, where 6% of employers did, compared with 2% of companies in the South and the West.