By Joel White, David A. Hyman, and Ge Bai
Approximately 59 million Americans currently participate in the gig economy.
For most, this is a part-time way to make money, but 17 million people derive all their income from contracted opportunities.
Gig workers are found in various industries, including transportation (for example, Uber, DoorDash, and InstaCart), freelancing (Upwork), e-commerce (eBay and Etsy), and more traditional contract work such as architects, project managers, construction workers, and lawyers.
There are more gig workers in construction (carpenters, electricians, plumbers, installers) than in any other industry. The trend toward gig work is growing as more Americans seek the flexibility and rewards that come with it. An expected 86 million people will be in the gig workforce by 2027.
Health-Care Challenges
Most American workers—about 55 percent, according to the Census Bureau—are covered by employer-sponsored health insurance. Gig workers, however, are not employees of their contracting companies, which do not provide access to employer-sponsored health insurance under the current legal framework.
Full-time workers pay their premiums with tax-free dollars, but gig workers do not receive those tax benefits. They sometimes must use after-tax dollars to pay for their premiums for health coverage they must purchase on their own, often on the individual market.
Limited Coverage Choices
Low-income gig workers can be eligible for Medicaid. However, as with other Medicaid beneficiaries, their access to care, especially to physicians and specialists, is worse than private coverage and in many areas can be minimal and restricted.
Gig workers can purchase individual insurance plans through the Affordable Care Act (ACA) Marketplace, and some may be eligible for subsidies. However, most plans in the individual marketplace come with high deductibles that average twice as much as an average health savings account (HSA) deductible, exposing gig workers to substantial financial risks.
Although these risks can be mitigated by the use of HSAs, gig workers typically do not receive contributions from their contracting companies as full-time employees do, even if they already have an HSA. ACA plans also have narrower provider networks than most HSAs and employer plans, limiting access to care.
These challenges leave gig workers and their contracting companies unsatisfied. Almost one-third, 31 percent, of gig workers are uninsured, and 48 percent believe their work status has negatively affected their ability to get health insurance. On the other hand, companies that employ gig workers are looking for new ways to provide benefits that reward the most effective gig workers.
Big HSA Advantages
The most straightforward way to improve gig workers’ access to affordable health care is to improve the availability of HSAs. These plans require people to secure insurance coverage with a minimum deductible, currently $1,600 for an individual or $3,200 for a family. Individuals can then set up an HSA account to fill in plan cost-sharing, such as the deductible or copayments for drugs or doctors, and to pay for services not covered by the insurance plan.
Contributions to the HSA offer account holders triple tax benefits: they are tax-deductible; funds grow tax-free, and withdrawals to pay for qualified medical expenses, including cash-based transactions, deductibles, copayments, and coinsurance, are not taxable.
With substantial flexibility and financial benefits, HSAs have been steadily gaining in popularity, according to the KFF research organization.
Solid Reform Options
Congress can use HSAs to address the challenges in the gig economy by expanding gig workers’ access to more affordable health care options (widening access to care) while providing employers with new benefit tools to attract, retain, and reward high-performing gig workers.
None of these solutions would require additional administrative complexities or new government bureaucracies.
First, Congress should allow multiple companies to contribute tax-deductible funds to gig workers’ HSAs. This action would directly benefit gig workers who would otherwise opt out of insurance entirely because they are deterred by the prospect of high out-of-pocket spending for Marketplace plans.
Second, Congress should clarify that a contribution to a gig worker’s HSA does not make the worker an employee of the contributor. This clarification would incentivize companies to contribute to gig workers’ HSAs because they would not have to worry that such contributions would give gig workers additional rights, such as claims for retirement and other benefits.
Third, Congress should require that HSAs be used exclusively for medical expenses and allow HSA balances to be passed on or transferred to other individuals. That would prevent HSAs from being used as a tax-favored way to pay for nonmedical expenses, create a way to address medical debt, and promote philanthropy.
Health-Plan Decoupling
Currently, one cannot contribute to an HSA unless one has a high-deductible health plan that covers only certain preventive services before the deductible, limiting HSA access for low-income populations enrolled in Marketplace, Medicare, and Medicaid plans.
Congress should reform the 20-year-old rules that set minimum HSA deductibles ($1,600 for single coverage and $3,200 for family coverage in 2024) by decoupling HSAs from the high-deductible health plan requirement. Instead, Congress should allow HSAs, regardless of the dollar value of the deductible.
Additionally, HSA funds now may not be used to pay premiums, limiting their utility for gig workers and discouraging them from seeking insurance coverage. Removing these restrictions would incentivize insurance coverage, expand insurance choices, and reduce financial exposure for gig workers.
Joel White ([email protected]) is president of the Council for Affordable Health Coverage, David A. Hyman, M.D., J.D., is a professor at Georgetown University Law Center, and Ge Bai is an accounting professor at Johns Hopkins Bloomberg School of Public Health. A version of this article was published in HealthAffairs. Reprinted with permission.
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