How to Affordably Insure the Gig Economy in a Covid-19 Recession

Given what’s at stake, now is the time to determine - and act on - private market and public policy solutions to strengthen America’s safety net.

Uber and Lyft warned they would need to leave California after a recent court decision sided with the state in enforcing AB5, which extends employee classification status to some types of gig workers - many classes of independent workers are exempt. California’s AB5 law was enacted in September 2019, and New York, New Jersey and Illinois seem to be following it with similar legislation in the works.?

There's no question something needs to be done to strengthen America's safety net. But AB5 is just closing a partial loophole. As Chris Taylor writes for Reuters, “our healthcare systems are designed for the workforce of 1950.”?

Independent workers may surpass 50% of the American workforce before the end of the current recession.?Independent workers face substantially higher uninsured rates as compared to traditional employees due to:

1. high cost of healthcare in the US;
2. self-employment tax penalties vs employer-based insurance;
3. adverse selection; and
4. lack of a competitive market for health insurance for independent workers.

The recession will result in significant increases in the number of Americans without insurance for several years, even with expansion of Medicaid.?

Health systems were already in a precarious financial position as well.?Pre-COVID, patient payments accounted for 30 percent of healthcare revenue.?A significant increase in America’s uninsured and under-insured means health systems face a broken revenue model.?

A number of established health insurers are focusing on ACA-compliant “micro network” products to increase affordability while meeting buyer needs, as well as growing their highly profitable supplemental insurance membership.?

Innovative, non-ACA-compliant insurance models tailored to serve independent workers also are emerging: self-service, mass personalization of benefit designs, digital-first coverage, new forms of price transparency, and AI-based care.?

Centene’s Investor Day featured Ambetter’s Artificial Intelligence chatbot, Amber, which assists members with benefits and costs, rewards, making a payment, digital ID card, and creating an account.?Centene is also piloting Amber capabilities in premium payment, billing inquiries, cost share info, telehealth, MHP, and coverage.??8-year-old Oscar emphasizes virtual care and member engagement.?4-year-old Bright Health typically partners with one health system in each market to help set up its insurance plan.?

Sidecar Health's fixed indemnity insurance is an example of an innovative, non-ACA-compliant health insurance model. Their purchase experience meets current consumer digital shopping expectations, featuring mass personalization such as the ability to quickly and easily customize deductible and maximum (Sidecar’s max, not the member’s); elect whether Rx is included; and fix the rate for 3 years (handy for increasing retention, which is notably challenging in the individual market).

Similar to many Medical Cost Sharing plans (which are also non-ACA-compliant, but grandfathered under ACA), Sidecar has no network.?Their platform helps members shop for providers - including sharing prices other Sidecar Health members have paid. Members can see the reimbursed rate to aid negotiations, and pay for care upfront using their Sidecar Health payment card. To get reimbursed the preset fee for a given covered service/procedure, members upload a picture of their itemized bill (another feature that feels less stressful than traditional insurance).?If a member obtains care at a lower cost than the preset rate, they keep the balance; and if a member’s care costs more than the preset rate, they pay the balance.

Beyond the health insurance products and innovations described above, more companies are targeting uninsured and underinsured by offering innovative lower-cost, higher-convenience healthcare.?Direct-to-consumer digital healthcare delivery brands such as Lemonaid, hims & hers and Nurx are growing rapidly.?Sam’s Club is piloting “Care Accelerator” health packages to lower out of pocket costs in partnership with Humana, on-demand text-based primary care provider 98point6 and Quest Diagnostics across primary care, dental, optical, alternative medicine and digital health. Anthem’s Exponential Technology team launched virtual doctor app Sydney direct-to-consumer in late 2019, already racking up a 250% increase in engagement rates on text & video virtual care.

However, systemic barriers to a robust individual health insurance market, combined with the financial hardships and uncertainty faced by individuals and families in this segment during a prolonged recession, means federal and state governments will need to act. There are several measures that can support a more innovative, competitive, affordable health insurance market for independent workers:

• The newly-enacted Individual Contribution HRAs (ICHRA) could be modified to enable gig platforms and other employers to contribute to independent contractors’ health insurance.?
• Health insurance tax breaks currently available only to employers could be extended to independent workers.?
• Expanding the incentives for and regulation of non-ACA-compliant insurance could spur competition based on value.?

These solutions should be considered as part of upcoming debate at federal and state levels to reduce burdens on Medicaid budgets, better manage the volume of uninsured and underinsured patient care that health systems must navigate, and provide a safety net for so many of America’s essential workers during a prolonged healthcare crisis.

To read more about market size and segments, trends, innovation and health policy in the individual health insurance market, you can check out Shift Health Advisory's white paper.