Interesting. I'd need to see the chances you have for the crystals dropping, though. And I'm concerned about having him reduce his maximum hitpoints for anything. The benefit to keep it from feeling like shit would have to be too big to be balancable.
I think an either-or scenario would work. However, I'm concerned about just adding another infinite health ability to the game, considering we already have Sion, Cho'gath, and now Swain. (And technically Sylas, but that's dependent on Cho'gath being on the enemy team. And Overgrowth counts, too, I suppose). Maybe there's another way to go about it?
Perhaps another way would be to let him upgrade once he hits a certain threshold of crystals, and not have it consume them? And is there another stat we can use in place of HP? I'm thinking armor/MR, instead, both because that's what crystals tend to do in fantasy (reflect blows and magic and shit), and because we only have one other champion who can infinitely stack either of those stats - Thresh - meaning that there's not going to be "oh, look, another infinite health champion. Yaaaay" reaction.
One other thing is that it being based on the number of enemies that die near him gives him crystals, rather than being a percent chance, might be better. It can be the same ratio, but more predictable and eliminates feels-bad scenarios for both Skarner (if he has shit luck with drops) and for his opponents (drop luck being too favorable for Skarner).