By NextBestFitIncome-based premiums in a multi-payer system
Premiums are set as a percentage of income (like German payroll contributions) instead of a flat amount.
Draft decision:RejectedConfidence: high · not yet reviewed
Requires a multi-payer system, which was rejected.
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Income-based premiums in a multi-payer system
Requires:
Regulated multi-payer: everyone must have a non-profit or tightly regulated planTens of millions of people have no coverageRejectedConcrete changes if chosen
What would actually have to change in law, agencies, payment rules, or systems.
- Set premiums as a percentage of wages, split between employer and employee
- Create rules for self-employed and gig workers
- Collect through payroll withholding
Effects
Each effect has its own page: the evidence, the case that it is or isn't a real cost, and whom it affects.
What it fixes
- Premiums are a large, flat, hidden tax on wages
Setting premiums as a share of income makes contributions fairer than flat premiums while retaining plan choice.
- Losing the choice of health plan and insurer competition
Income-based premiums retain the ability to choose a health plan.
What it creates or worsens
- Replacing premiums with taxes
Income-based premiums function as a payroll tax.
- Adds paperwork, coordination, or complexity
Income-based contributions require special rules for self-employed and gig workers.
- Employer health taxes can lower wages at firms that never offered coverage
Income-based premiums function as payroll contributions rather than a flat amount per worker.
Who's affected
Who gains
- Low- and middle-income households
- Premiums are a large, flat, hidden tax on wages: A flat premium takes a large share of a modest paycheck.
- Replacing premiums with taxes: Income-based taxes replace flat premiums that took a large share of their pay.
- Employers
- Premiums are a large, flat, hidden tax on wages: Small employers pay the same premiums on lower payrolls.
- People with employer coverage
- Losing the choice of health plan and insurer competition: They can't keep or pick a plan they like, or switch if service is poor.
- Employer health taxes can lower wages at firms that never offered coverage: Savings at firms that offered expensive coverage can raise workers’ wages.
Who loses
- High earners
- Premiums are a large, flat, hidden tax on wages: A flat premium is a small share of high pay.
- Replacing premiums with taxes: They pay more under income-based taxes than they did in flat premiums.
- Health insurers, brokers, and their shareholders
- Premiums are a large, flat, hidden tax on wages: Premiums are insurers' revenue.
- Employers
- Replacing premiums with taxes: Businesses that never offered coverage start paying toward it.
- Employer health taxes can lower wages at firms that never offered coverage: Small businesses that offered no coverage face a new payroll cost.
- Low- and middle-income households
- Employer health taxes can lower wages at firms that never offered coverage: New employer health taxes tend to reduce wages at firms that previously offered no coverage.
Where it has been tried
- Germany: 14.6% of wages split between employers and employees, plus a fund-specific extra contribution averaging about 3% in 2026 (roughly 17.5% in total).