California gig worker law may lead to less health coverage as employers adjust
A new California law that reclassifies some independent contractors as employees, requiring they be offered a range of benefits and worker protections, will likely expand health insurance coverage in the state, health policy experts say.
But it might end up harming some workers.
That’s in part because the law, which takes effect Jan. 1, could cut two ways. While inducing many employers to extend health insurance to newly reclassified employees, Assembly Bill 5 might prompt others to shift some workers from full-time to part-time status to avoid offering them health coverage, or — in the case of some small firms — to drop such benefits altogether.
Some companies might trim their workforce to limit cost increases. Benefits typically account for about 30% of total employee compensation costs, and health insurance is the largest component of that.
“I think we will see more people classified as employees over time,” said Ken Jacobs, chair of the Center for Labor Research at the University of California-Berkeley. “And that is very likely to expand the number who are offered and take coverage. But the situation is definitely fluid.”
Adding to the fluidity: Some large employers are contesting the new law. Uber, the ride-sharing app company, has said the law does not apply to its drivers and indicated it is prepared to defend its position in court. The company has joined competitor Lyft in broaching the idea of a 2020 ballot initiative to challenge the law.
California Gov. Gavin Newsom has indicated a willingness to negotiate changes and exemptions with those companies and others.
Uber did not respond to requests for comment, and Lyft declined to comment.
In addition to shared-ride drivers, the law affects construction workers, custodians and truck drivers, among others.
Some independent contractors prefer the flexibility that comes with setting their own hours, but others are eagerly eyeing health coverage.
Steve Gregg, a resident of Antioch, Calif., is among them. Gregg, 51, is uninsured and makes too much to qualify for Medi-Cal, the state’s version of the Medicaid program. He hopes to be reclassified as an Uber employee in 2020, primarily to gain access to health insurance.
“The only medical care I can really afford right now is to use an online doctor for my blood pressure medicine,” said Gregg, who typically logs 50 hours or more a week driving for Uber in the Bay Area.
Under the Affordable Care Act, companies with at least 50 full-time employees must pay a penalty if they don’t offer health insurance to those who work 30 hours or more a week.
California’s new “gig economy” law requires employers to treat independent contractors as regular employees if the work they perform is central to the core mission of the company and they operate under the company’s direction.
Several kinds of workers are exempt from the law’s provisions, however, including insurance and real estate agents, investment advisers, doctors and nurses, direct sales workers and commercial fishermen.
Jacobs said other states will closely watch what happens in California, given that some tech companies hire large numbers of independent contractors.
New Jersey, Massachusetts and Connecticut have similar labor laws on the books. Lawmakers in Oregon and Washington state are eyeing legislation akin to California’s.
Independent contractors in the Golden State are nearly twice as likely to be uninsured as regular employees, according to an analysis by UC-Berkeley’s Center for Labor Research, known as the Labor Center. From 2014 to 2016, just under 70% of workers classified as employees had employer-sponsored health insurance, compared with 32% of independent contractors, the study shows.