The gig economy owes a lot to Obamacare.
In the wake of the financial crisis, as smartphones were just becoming the norm, millions of Americans were out of work. Then, Uber hit the market one year before Obamacare was passed, and suddenly, the gig economy seemed feasible.
Startups could launch without providing costly healthcare, and their workersexcuse me, independent contractorsdidnt have to worry about going broke if they got sick, thanks to help from the government. The gig economy exploded after 2010 and hasnt stopped growing.
Now, senate Republicans want to, in the parlance of Silicon Valley, move fast and break things.
On Thursday, they introduced a revised version of the Better Care Reconciliation Act (BCRA), now with that special Ted Cruz touch.
It’s as destructive as the originalpositive changes, like additional funds to fight the opioid epidemic, cant make up for new rules that let insurers offer skimpy plans that could turn quality policies into expensive, high-risk pools.
The bill is set to have a major impact on millions of Americans, but gig economy workers should be particularly worried.
What happens under the Senate plan
Currently, gig economy workers who make less than $47,550 qualify for tax credits under Obamacare, which help to lower how much insurance costs.
Under the Senate plan, that would drop to $41,580.
Obviously, that means a lot less people will qualify for subsidies, meaning a good chunk of people will have to pay more for their insurance.
But premium subsidies would be less generous under the Senate plan, according to Josh Bivens, director of research at the Economic Policy Institute. And cost-sharing subsidies would disappear, so workers would pay more out of pocket.
On top of that, the revisions revealed Thursday let insurance companies offer bare-bones packages that don’t meet Obamacare standards, as long as they also provide a plan that does.
So, insurers could sell cheap policies that reject people with pre-existing conditions (not allowed under Obamacare) and don’t cover maternity or mental health care.
Those kinds of plans could attract the young and healthy people who currently subsidize the old and sick. Meanwhile, the cost of ACA-compliant plans would likely “skyrocket,” according to the Kaiser Family Foundation, as they become swollen with those who actually need health care.
If you’re young, that means you could save money on a terrible plan. If you’re 18 to 34 years old and want the same silver plan you have now under Obamacare, you’d pay 17 percent more under the Senate plan, Kaiser said.
Why even offer health insurance at that point?
Not great! But still, that’s nothing compared to how unbelievably screwed older people are under the BCRA. If you’re 64 years old and make $56,800, you pay about $6,800 under Obamacare. That would jump to $20,500 (!!!) under the Senate plan.
This is a particularly scary problem for older gig economy workers. And it turns out, there’s a lot of them.
Who works in the gig economy?
Gig economy workers are sometimes stereotyped as entitled millennials earning money for avocado toast.
Let’s dispel that notion right now. Here’s a chart from Uber’s own data:
As you can see, more than half of Uber drivers are over 40 years old. Plenty of them are in their 50s and 60s.
The stereotype of gig economy workers as Snapchatting millennials makes it easier to imagine they don’t have families or devastating medical bills. But many do, and this health care bill is terrible for them.
And because companies don’t want to pay for their higher wages and benefits costs, older workers find it harder to find full-time jobsmaking them prime candidates for the gig economy.
Yes, many people drive for Uber and rent out rooms on Airbnb because they want to. Twenty-eight percent of them, however, work in the gig economy “out of necessity” rather than “by choice,” according to the McKinsey Global Institute.
It’s not clear how many of them have other sources of income. What is clear is that gigs don’t always pay well. In some cities, like Dallas and Miami, average monthly earnings from gigs on digital platforms are less than $700 a month, the JPMorgan Chase Institute found.
That’s not a lot of money. And for the poor, the BRCA is just brutal.
Under Obamacare, states that opted into the Medicaid expansion covered people making up to 138 percent of the federal poverty line ($16,500). The Senate plan would kill the expansion, lowering it back down to 100 percent ($12,060) and capping federal funds based on a state’s population.
Overall, under the BCRA, around 15 million of our country’s most vulnerable citizens would lose their Medicaid coverage over the next decade, according to the Congressional Budget Office.
Why you should care
“Pre-ACA, to get really good insurance, you needed a job, period,” Bivens said.
After it passed, “you could decide to work non-traditional jobs and have decent insurance you could rely on.”
That allowed the gig economy to growand it’s not done. A study from Intuit and Emergent Research estimated that 9.2 million Americans will work in the gig economy in 2021. That’s up from 3.8 million in 2016.
That’s only a fraction of the contingent workers (temps, freelancers, independent contractors, etc.) who make up a whopping 40 percent of the U.S. workforce, according to a study released last year by the U.S. Government Accountability Office.
The bottom line: There are a lot of Americans who don’t work traditional full-time jobs and don’t get benefits from their employer.
That wouldn’t be a huge problem if the U.S. government provided universal health care, like most developed countries on Earth.
Instead, we mainly tie health care to employment, for complicated reasons that include WWII wage controls and the IRS. Even if you have a full-time job, however, you shouldn’t be too comfortableyou could be part of the gig economy soon enough.
“Theres no such thing as job security,” said Diane Mulcahy, author of The Gig Economy. Companies have demonstrated, time and time again, at any time, theyll eliminate, automate, outsource, and offshore full-time positions.”
“The gig economy is significant, it’s growing, and its not going away”
“The gig economy is significant, its growing, and its not going away,” Mulcahy said.
The safety net wasn’t built for this. A few politicians are trying to address the shortcoming.
Two Democrats in the Senate, Mark Warner and Suzan DelBene, introduced a bill that would commit $20 million to organizations that are building and researching “portable benefit models” to insure independent workers.
It’s a start, but that’s a drop in the bucket when it comes to health care, and the bill would need the support of at least a few GOP lawmakers.
As for the BCRA, the revised plan doesn’t look any closer to gaining support of the 50 Senate Republicans it needs. (Surprise, surprise: No Democrats back the bill, which aims to undo their party’s signature achievement during the Obama years.)
Senators will make amendments to it next week, when a new CBO score is scheduled to come out.
It’s very possible the bill goes nowhere.
But this issue isn’t going away. The government passed the buck on health care to businesses, and now the nature of business is changing, dramatically.
Workers, watching the ground underneath them shift, could end up with the bill. And some of them would literally die because of it.
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