Impact of ACA Repeal on the Gig Economy
In 2015, about 10 percent of all workers in the U.S. were self-employed, meaning they worked for themselves as independent contractors, business owners or other occupations. The number of independent workers has declined somewhat since the end of the recession, but millions of people continue to branch out on their own. It’s called a gig economy, one that’s based on organizations hiring contract workers to complete jobs they may have otherwise hired employees to do.
The gig economy plays an integral role in today’s top industries. Intuit predicted that by 2020, about 40 percent of American workers will be independent contractors. With an increase in digitization, a workforce that is more mobile than ever before and work that can be done from anywhere, employers can choose the best people for the job by going outside the box – far outside the box. Switching from employees to freelancers gives companies greater flexibility, and it saves money. They don’t have to offer the perks that an employee might expect, including employer-sponsored healthcare coverage.
Self-employed people have to buy their own health insurance, which was more difficult to do before the Affordable Care Act put certain standards into place. As the number of freelancers and independent contractors grows, the number of people without employer-provided healthcare will also grow. This means that Uber drivers, web designers, programmers and even adjunct professors who teach more than half the courses in American universities are relying on Obamacare – and all its protections, provisions and cost-saving subsidies – for health coverage.
President Donald Trump has vowed to repeal Obamacare. Although Trump says that there are parts of the ACA he wishes to keep, like coverage for pre-existing conditions and allowing children to remain on a parent’s policy until age 26, there has been no discussion regarding what will happen to freelancers and independent contractors who rely on the ACA for health coverage. The Congressional Budget Office estimates that as many as 18 million people will lose coverage in the first year if the ACA is repealed with millions more losing insurance after the first year.
Gig Economy Trends
The term “gig economy” stems from the term “gigging,” where newly unemployed professionals began working short-term positions, or “gigs,” to make ends meet during the 2009 recession. The popularity of “gigging” has grown significantly, not only for workers but for consumers as well. Hiring an Uber driver is often cheaper than hailing a cab, and staying at someone’s house through Airbnb can save hundreds over booking a traditional hotel. Some economists predict that the number of independent workers will rise to half the working population over the next five years.
Although past trends have been for large businesses to shift to a gig economy, over the next few years, small businesses could also begin to take advantage of freelancers. There’s also a trend toward freelance opportunities in offline positions as well. Currently, most freelance work is internet-based, but as more companies begin to see the benefit of independent contractors, many other positions may also be converted from full- or part-time positions to freelance jobs.
Health Insurance in the Gig Economy
One of the biggest benefits of the ACA was that it allowed people with non-traditional jobs to obtain insurance. Regular full-time and even some part-time employees are often offered health insurance through their employer, and job-based coverage is much cheaper since employers pick up most of the tab. Before Obamacare took effect, a lot of people stuck with a job they may not have liked simply for the benefits package. Better private insurance options changed the game and allowed more people to branch out on their own.
After nearly seven years since the passage of the Affordable Care Act, 35 percent of independent contractors remain uninsured today. But when surveyed by Stride Health, self-employed workers did report that for the 2017 open enrollment period, they planned to finally sign up for health insurance. In fact, just 14 percent of the gig economy planned to forgo coverage for 2017.
Self-employed people have always had a problem finding affordable coverage. The cost of health insurance for an independent contractor ranges from $500 to $2,000 per month. This coverage may not include dental, vision or eye care. For some freelancers, the cost may be prohibitive, leading them to choose the IRS tax penalty rather than pay monthly premiums they cannot afford.
Importance of Insurance
Despite the cost, health insurance is even more critical for freelancers than it is for those who work a traditional job. The penalty for not having insurance is significant, especially if you’re self-employed. For next year’s taxes, you’ll be charged 2.5 percent of your taxable annual income or $695 per uninsured adult in your family, whichever is higher. Penalty notwithstanding, the cost of getting sick can be astronomical. Without health insurance, you’re responsible for the total cost of care, from getting an annual flu shot to treating a broken leg. A burst appendix could cost you over $16,000 if you find the right doctor – and up to five times that price if you don’t.
Kaiser Family Foundation found that a young adult aged 25 to 34 had a 5 percent chance of incurring a medical bill that could exceed $27,000 and a 10 percent chance of incurring $13,000 in medical costs. Back injuries were one of the top five reasons for emergency room visits among people aged 25 to 34, and the average bill for treating a back injury was almost $5,000.
You may also be out of work while you heal, and although insurance will only cover your illness or injury, if you’re unable to work, you will be unable to make money as a freelancer. This isn’t always true of regular employees, who may have sick time accumulated that allows them to be paid as they recuperate. If you’re concerned about mounting medical bills, the stress can delay your healing, putting you into an even deeper financial bind. Having health insurance to cover your medical bills can relieve stress, help you heal faster and get you back to work more quickly.
Insurance Options for Freelancers
Freelancers have always had options for getting covered, but the Affordable Care Act standardized the kind of plans being sold on and off the marketplace while adding protections and subsidies. Trump has pledged to repeal Obamacare, but it’s not yet clear what a new healthcare reform bill might look like once it finally passes through the House and Senate. There are several options on the table at this point. Right now, if you’re self-employed, you can:
- Sign up using your state marketplace or the federal site at HealthCare.gov.
- Use a site like this one, where you can explore coverage options and check for premium discounts based on your income.
- Enroll directly with a health insurance company.
- Enroll in Medicare or CHIP for your kids.
Open enrollment for 2017 ended on January 31. However, some people can still sign up if they meet qualifying life events. These people are given a special enrollment period to sign up for coverage. Outside of open enrollment, you can enroll in a short-term health plan that offers catastrophic coverage until the next enrollment period begins. The new administration has yet to reveal when or if enrollment periods will still be part of the healthcare system going forward.
Lesser Known Parts of the ACA
The ACA is a complicated piece of legislation with many different parts. One aspect of Obamacare that you might not know about is the limit on surprise medical bills from a visit to the emergency room. Under the ACA, an insurance company has to charge the same co-pay for out-of-network emergency care as it does for in-network care, and hospitals have limits on excess charges. In addition, hospitals must charge lower rates to low-income patients if they qualify for financial assistance programs.
The pre-existing condition protections under the ACA are also important to freelancers due to lifestyle issues that may lead them to develop chronic illnesses, like carpal tunnel syndrome or back problems. Insurance companies can’t deny you coverage or charge higher rates if you have a pre-existing medical problem. This includes life-threatening illnesses like a previous cancer diagnosis or heart attack, as well as controllable chronic illnesses like diabetes or high blood pressure.
Implications of Repeal
The Republican-controlled Congress is currently taking steps to repeal the Affordable Care Act. As of now, there is no agreement on a plan to replace the program. Some analysts believe that a repeal of the ACA without a replacement plan in effect could cause a number of problems. For instance, Obamacare repeal could force self-employed workers back into more traditional positions, placing a significant burden on businesses that have now come to depend on freelancers. Supporters of repeal claim that it’s unlikely that Congress will completely repeal the law without a replacement as it could irreparably damage the economy as a whole.
The gig economy plays a vital role in today’s society, and many of those performing job duties as independent contractors or freelancers depend on the ACA for their health insurance. A repeal of the law could significantly damage the gig economy as well as the overall economy of the country. It could also leave millions without healthcare, pushing many into significant debt and even bankruptcy due to medical bills they cannot afford. President Trump and Congress will need to address this unique aspect of the healthcare system when they adopt a new plan for reform.