Who's Responsible for Your Uber Driver's Health Coverage?

For six months, Eliza Kinrose worked about ten hours a week delivering anything from cupcakes to art supplies to strangers’ homes.

Shortly after quitting her steady job as a recruiter, Kinrose, 29, signed up to work for a new San Francisco-based mobile delivery service called Postmates. She made about $15 an hour for six months, which was just enough to scrape by until she launched a yoga business.

Postmates is just one of an explosion of “gig economy” or “on-demand economy” companies that connect people seeking services with sellers of those services in a few minutes’ time. Those who work for the gig economy do not receive health insurance, or any of the other social protections extended to employees. Unless they are employed elsewhere, they need to find and pay for these protections on their own.

But one evening, Kinrose received an email from Postmates about an intriguing free "perk" to help her find health insurance called Stride Health.

Stride Health is a startup health insurance broker service, which makes recommendations about health plans that are tailored to people's needs. The company offers web and mobile services to assist customers once they've purchased a health plan, including premium payment reminders and guidance on whether they qualify for subsidies. Stride Health also shows customers how much scenarios, like asthma or heart disease, would affect their out of pocket costs.

San Francisco-based Stride Health is one of many startups taking advantage of new opportunities created by the Affordable Care Act and the perceived failings of the federal and state marketplaces for individuals to buy health insurance. It is unique, however, in targeting gig economy workers like Kinrose. Uber, Postmates and Taskrabbit, three of the largest gig economy companies, market Stride Health's service to their workers.

Stride Health's involvement with the gig economy may signal a shift in attitudes and priorities. According to Stride Health CEO Noah Lang, Uber and the rest are starting to care about the needs of their workers. "They want to make sure people don't end up in a tough spot by forgoing coverage," he said.

But critics of the gig economy say Stride Health is a bandaid solution, as workers are still on the hook to pay for their own health insurance.

“When we have a jobs-based social welfare system, some people get a combination of health care, disability and more,” said Ken Jacobs, chair of the Labor Center at UC Berkeley, who specializes in health care coverage and public policy. “In a world where people are operating separately from that, the safety net goes away."

How Big Is the Gig Economy, Really?

In cities across the United States, anyone with a smartphone can order a meal from Postmates, a ride to work via Lyft or Uber, groceries on Instacart or a home cleaning on Handy. These services are so pervasive, with billions in total sales as a group that it’s hard to believe they only sprung up in the past five years.

The on-demand economy has been hailed as the next big thing, but labor economists say it still hasn’t made much of a dent in the overall U.S. economy. The idea may be disruptive to the status quo, but the most recent data suggests that Americans are no less likely to be self-employed than a decade ago.

“The gig economy currently is not really even big enough to show up in the [national economic] data,” said Jacobs. “And unfortunately, we don’t yet have a good sense of how big it will be.”

One promising trend, according to Jacobs, is that the companies are starting to release more data on their workers. In 2014, Uber collaborated with Princeton University economist Alan Kreuger on a report that determined the company had 160,000 “driver partners” in the United States. By contrast, the Bureau of Labor Statistics estimated that there were some 230,000 taxi-drivers in the U.S. in 2012.

Uber may not show up in national data just yet, but it is having an outsized impact in politics and popular culture. Even the presidential candidates are taking a side: While Hilary Clinton says she wants to “crack down” on sharing economy abuses of workers, Jeb Bush was recently spotted hailing an Uber ride in San Francisco.

Independent Contractors or Employees? 

By targeting the gig economy, Stride Health has taken a central role in an ongoing debate between policymakers, investors, and litigators, about whether on-demand companies should be treating their workers as employees and paying their expenses, as well as providing health insurance and other benefits.

Uber, a San Francisco-based company that uses a smartphone app to link people needing car rides with drivers for hire who use their own vehicles, is currently facing a looming class action lawsuit. In the suit, three Uber drivers are collectively challenging the company on whether they should be considered employees under the law – and not independent contractors, as the company now classifies them.

And in June, the California Labor Commission ruled against Uber in determining that an ex-driver was entitled to reimbursement for business expenses.

“Many drivers have included on their list of issues that they are on their own for health insurance,” said Shannon Liss-Riordan, of Boston, Mass. the lead plaintiff attorney in the class action lawsuit against Uber. Liss-Riordan is also taking aim against Uber’s main rival, Lyft, and has spoken to hundreds of people who drive for these companies. “These drivers are left in the cold,” she said.

How the Uber case ends up could have national implications. If the company loses its class-action lawsuit and has to reclassify its drivers from independent contractors to employees, that would force the company to pay for things like expenses, and provide benefits to full-time drivers. One recent estimate is that Uber would need to pay $209 million a year to reclassify its drivers to employees – and that’s just in California.

Not everyone believes that Uber and the rest have left anyone out in the cold.

For one thing, the Affordable Care Act has relieved the burden for many drivers, as it provides subsidies for low-income people to buy health insurance independently. Uber's CEO Travis Kalanick reportedly referred to the ACA as "huge" for the gig economy.

Some policymakers envision a middle ground, where workers have some added protections but are not full employees. One idea is a new worker category called a "dependent contractor," which is legal in Germany, Canada and other countries, but not in the United States.

U.S. Senator Mark Warner, D-Virginia, has spent more than a year researching the on-demand economy. He has proposed numerous paths forward to broker a peace in the legal wars, including the dependent contractor model. He has also proposed similar marketplaces to the Affordable Care Act for other key benefits, including workers' compensation.

But Warner doesn't agree that the ACA is a silver bullet for the gig economy, as these companies do not pay into it. Uber avoids providing health insurance to drivers, which it considers contractors, as the ACA mandates that only employers extend coverage to full-time employees. That’s a loophole that saves gig economy companies a lot of money.

Walking the Tightrope 

Some critics of Uber have painted the company’s top executives as indifferent to the plight of workers. But by providing services to workers, these companies risk adding fuel to the legal argument that they should be employees and not independent contractors.

The I.R.S. has about twenty factors that it takes into account when determining a worker classification. One important distinction is how much "control" an employer has over the work that's being done, but it's not always clear what control means.

“Essentially, this [partnership with Stride Health] is about how these workers can get health care without exposing Uber and the rest to liability or responsibility,” said UC Berkeley’s Jacobs.

Lang doesn’t totally disagree, but paints the partnership in a more positive light: “These marketplaces care about growing and maintaining their labor pool,” he said. “But at the same time, they have to minimize their risks by not stepping over any of the lines.”

If these companies do nothing, their practices may draw fire from policymakers. An uninsured and at-risk population is likely to incur major health costs in the long-term, costs that could eventually be borne by taxpayers. According to Lang, about 40 percent of gig economy workers surveyed by Stride Health said they would "not have gotten coverage otherwise."

Stride Health seems to be a safe solution for the gig economy companies. It is unclear how many workers are using the tool, but Uber said it is helping those who are uninsured drivers find an affordable health plan. And drivers seem to like it.

“Finding affordable, effective health insurance is top of mind for many drivers," an Uber spokesperson said in a press release. A spokesperson for Taskrabbit said the company “vetted other options” but ultimately opted to partner with Stride due to the “thoughtful approach for independent contractors.”

Postmates declined to comment on its reasons for partnering with Stride. Uber and Taskrabbit emailed statements that could not be attributed to any company official. 

Will On-Demand Companies Ever Provide Health Insurance to Workers?

Critics of the on-demand economy say that Uber and the rest are the latest in a long line of companies that use fancy wordplay and questionable tactics to avoid protecting workers. These legal battles go back decades, with FedEx most recently settling a lawsuit with drivers who claimed they had been misclassified.

“Uber tries to argue that it’s not in the car service industry; it’s a technology platform,” said Liss-Riordan in an interview. “The court rejected that.”

Some on-demand economy companies are now taking steps to reclassify their workers as employees, including Doctor on Demand, a company that connects people with doctors online in a matter of minutes, as well as mobile delivery services Instacart and Shyp.

But Lang is doubtful that this will trigger a shift for the on-demand economy at large. As Lang points out, Uber’s labor pool is much larger than an Instarcart or Shyp and its workers are not specialized like Doctor on Demand’s physicians – all they need is a drivers’ license. “I give Shyp and Instacart kudos, of course,” he said, “but it’s also opportunistic for them.”

A change in federal law or a landmark Supreme Court ruling might force Uber, Lyft and others to treat their workers as employees. This wouldn’t mean that every driver would receive employee-sponsored health insurance overnight.

Dan Diamond, executive editor for the research and consulting firm The Advisory Board, has written about how Uber would handle the health care problem if its drivers were considered employees. Diamond does not believe that workers would immediately benefit from a reclassification.

Uber might opt to avoid providing health insurance by paying a fee under the Affordable Care Act (a requirement if businesses do not provide health insurance to employees who work more than 30 hours per week). It might also cap workers’ at 29 hours per week to keep them part-time employees.

Diamond expects that Uber will use every weapon in its arsenal to avoid such an outcome. “For Uber, none of these options are ideal.”

Deco Carter, a Bay Area-based Lyft driver, said he “knew the risks” when he joined the growing ranks of gig economy workers. He has been involved in two auto accidents, and lacked income for several weeks until he got his car fixed.

"I really didn't have anything to fall back on," he said. "If it wasn't for my fiancé, I don't know what I would have done."

In the years ahead, he hopes that Lyft would consider extending benefits to drivers, particularly to those who work full-time hours. Lyft is not currently working with Stride Health, but it drivers have access to an alternative service called the eHealth marketplace. A spokesperson denied requests from KQED for an interview.

But while executives at these companies may want to do more to protect workers, they are also under pressure to protect their bottom line. It would be highly expensive for them to reclassify workers.

Most experts are watching the presidential race as an indicator of what’s to come.

“My fear is that we’ll either re-classify everyone as an employee or trust the unfettered hand of capitalism,” said Warner. “Before that happens, I’m hoping those of us who are thinking about this in a bipartisan fashion can come up with some policy ideas that might be embraced by both sides.”