What Does Work Have to do with Healthcare Anyway?

This op-ed originally appeared in American Habits on December 2, 2024.

If you’re a healthy working-age adult in the United States, you typically need a health insurance plan to afford seeing a doctor. To afford a health insurance plan, you typically need a “real job.” You typically need a steady paycheck to be considered someone having a “real job,” meaning you also typically receive a W2 in the mail every year. You typically sign up for your employer’s health insurance plan during the enrollment period, and you typically find yourself paying a small amount on top of your employer’s contributions each paycheck.

It’s all very typical because it’s the way things have been done for over half a century — there’s hardly a person alive today who remembers a time when this was not the status quo. And that status quo has a lot to do with why the United States continues to see fringe benefits like health coverage as an exclusive benefit of W2 employees. Left out of this equation, of course, are the atypical 1099 workers supporting our economy: the independent contractors, the freelancers, the gig workers, the sole proprietors, and the self-employed. If you’re one of 11.9 million of these workers who choose the life of a 1099 contractor over W2 employment, you either marry into a spouse’s benefits plan, look elsewhere for overpriced coverage, or simply go without.

However, contrary to what many are so willing to claim, 1099 self-employment is not the problem with this picture. The problem is that we’ve grown so comfortable with the notion that employee benefits are exclusive to typical employment relationships that we’ve stopped asking the important questions.

What does employment really have to do with healthcare anyway?

Why does sitting in a cubicle every day grant a person access to affordable health coverage, but carting people back and forth from place to place, delivering takeout in the freezing rain, and walking strangers’ dogs does not? In a perfect world, they’d all be covered. The hours a person puts in would be rewarded with the same baseline benefits as everyone else.

The distinction was made half a century ago, when people worked in coal mines and manufacturing plants, and entrepreneurs were few and far between. None of today’s gig economy — and I mean none of it — could have been conceived of when the foundations were laid.

As a result, the difference between independent contractors and employees comes down to a set of open-ended legal factors. Unfortunately, the unintended side-effect is that those altruistic enough to offer their contractors the same benefits as their employees tend to find themselves accused of being an employer, which tacks on a whole host of financial obligations.

A DoorDash delivery worker walks his bike along the road in the Mission neighborhood of San Francisco, California.

Thus, the status quo today is to pay contractors their fee, and nothing more. But the status quo is always vulnerable to disruption even when it’s decades in the making. For the 11.9 million independent contractors in the United States, it’s better late than never to finally resolve the arbitrary distinction between the traditionally employed and everyone else.

To that end, in 2023 Utah passed a counterintuitive, dare I say “atypical” bill to provide benefits to independent contractors. In the years before the bill passed, many advocated for turning independent contractors into W2 employees, creating some messier “third classification” of workers, dumping unaffordable mandatory coverage obligations on gig economy platforms, and many other unworkable policy proposals.

By contrast, Utah’s SB 233 added a simple exception to its law to exclude company-provided portable benefit contributions from the employment classification test. In effect, Utah laid a path for independent contractors to finally access subsidized healthcare coverage, along with many other fringe benefits, in only two pages — 350 words of legislative text. In the context of centuries of regulatory disincentives toward independent contracting, by a bipartisan, near-unanimous vote, Utah set course on a new frontier of sustainable self-employment and individual freedom.

Salt Lake City, UT, 2/4/2019: Passengers are waiting at the Uber and Lyft designated pick up stop at SLC’s Terminal 1.

Portable Benefits as Envisioned in Utah’s SB 233

SB 233, co-sponsored by Utah Sen. John Johnson and Rep. Ryan Wilcox looked to a solution called portable benefits to sustain the growing gig economy in Utah. Portable benefit plans are “portable,” because they are owned and chosen by an independent contractor as they move from client to client — or app-based platform to app-based platform. The benefits included in these plans, as envisioned by SB 233, are robust to match the individual needs of each individual worker.

Unlike the employment classification laws of yesterday, SB 233 embraces the atypical 1099 workers, opening up an entire market of possible coverage options that their clients — or app-based gig economy platforms — can subsidize through matching contributions. Now, a little under two years since the passage of SB 233, the nation’s first portable benefit pilot programs are underway, spearheaded by gig economy platforms like DoorDash, Shipt, and GrubHub, and supported by one of the nation’s first portable benefit providers, Stride Health.

From what little data has been released from these still-new pilot programs, DoorDash alone gave 4,400 Pennsylvania Dashers access to portable benefit plans, contributing just under half a million dollars into these accounts in the first two months.

The Work Still Left to Do in the States and Congress

The next step for the remaining states is to follow Utah’s lead, and then build more comprehensive programs for the independent contractor workforce. But like most regulatory issues, the states share their regulatory authority over employment relationships with the federal government — meaning the solution to this growing gap in coverage must be pursued in both the states and the federal government.

The states tend to oversee employment relationships when it comes to workers’ compensation claims, unemployment insurance or employment security coverage, and wage and hour requirements. To this end, these laws are intended to make sure employers are not misclassifying workers as independent contractors to avoid taxes and liability while demanding from a worker the same performance and time commitments as a standard employee. Nothing about these legal protections is wrong, or even up for debate. The only question state policymakers need to consider is whether enforcing these laws truly requires preventing contributions to worker benefit accounts.

Similarly, Congress has passed a number of laws over the decades that grant rights and protections to employees. Many of these laws are the bedrock of today’s worker-driven — and flourishing — economy, to the benefit of almost every living, working-age adult. But the rights and protections of independent contractors, as nonemployee workers, are largely left to the discretion of the executive branch agencies like the Department of Labor, the Internal Revenue Service, and many others.

Just like the laws enforced by the states, instead of rewriting these foundational federal laws, it makes far more sense from a public policy perspective to ask whether the goal was to protect employees or to exclude independent contractors from receiving benefits.

The former, no doubt, is the only reasonable conclusion.

The status quo has, for decades, dictated that benefits are a necessary factor in the employment classification equation. But finally, after many decades, Utah has opened the door for the nation’s policymakers to see in practice that benefits like health coverage have nothing to do with work at all. Fully voluntary, fully customizable, and fully flexible, Utah’s law shows the rest of the country that we don’t need to rewrite employment law or double down on bad policy. To recognize, uplift, and embrace the nation’s 1099 workforce, we just need to think outside the box.