The health care coverage that workers can obtain through the Affordable Care Act (ACA) has helped transform work for millions of individuals by providing affordable, portable health benefits regardless of employer coverage, and more flexibility to change jobs because of such benefits. The health care bills proposed by the House (American Health Care Act, or AHCA) and the Senate (Better Care Reconciliation Act, or BCRA) could put these advances very much at risk.
Health Care and Low-wage Work
Health coverage makes up about $3 per hour (or 8.3 percent) on average of what employers compensate working Americans. But this type of compensation does not reach low-wage workers: just 22 percent of low-wage workers (those in the bottom 25 percent of wages) get coverage from an employer plan. That’s compared to 71 percent of those in third quartile of earnings and 80 percent of the top quarter of earners. Health insurance widens the yawning inequality between high-wage and low-wage workers in an economy where the wages of the top 5 percent of earners is already six times higher than those in bottom 10 percent.
The state of health insurance for these low-wage workers was grim before the ACA passed in 2010. Only 40 percent of low-wage workers (those in the bottom 20 percent of earners) had any health care coverage. The percentage of low-wage workers receiving employer provided insurance had dropped by 17 percentage points from 1979 to 2010.
Restrictive state Medicaid rules made too many workers ineligible for assistance: just 10 percent of these low-wage workers had Medicaid due to eligibility limitations. Before the ACA, the average state set the income eligibility for low-income parents at just 68 percent of federal poverty level, meaning that a minimum wage parent of a child working thirty hours per week would not qualify for Medicaid. Working adults without children were generally ineligible except for those living in a minority of states who had Medicaid waivers to offer basic insurance plans. The results were stark on health care access: 43 percent of uninsured low-income adults with a chronic condition could not afford to see a doctor.
And for workers with income above Medicaid eligibility who did not receive employer-issued insurance plans, alternatives were unaffordable, if accessible at all. Premiums, let alone deductibles, would eat up most of their paychecks. And insurers could charge more for coverage or deny coverage altogether to people with pre-existing conditions. This didn’t just affect low-wage workers, but also self-employed people and entrepreneurs just setting out to start a new business. The connection between employment and insurance was that it caused a universally derided problem of “job lock,” where workers were stayed in jobs simply because they had insurance and not because they were best for their career or family.
How the ACA Changed Labor Force Dynamics
The Affordable Care Act has helped narrow the inequality between low-wage and high-wage workers, and between those engaged in the traditional jobs and those in emerging forms of labor. By 2014, the uninsured rates for low-income workers had dropped to 26 percent, and nearly a quarter (23 percent) were covered by Medicaid. Thirty-one states took advantage of nearly full federal funding to expand Medicaid eligibility to workers up to 138 percent of poverty. As such, the Medicaid expansion has become a primary form of health insurance for low-wage working families. Among families with adults on Medicaid, 64 percent have a family member who is working full-time.
Meanwhile, the portable benefits provided by the ACA have allowed workers more flexibility to change jobs, upgrade jobs, or find jobs with better work and family balance. Workers in states that opted to expand Medicaid were 7.6 percent more likely to switch occupations than those in states that were the least generous. Importantly, the ACA has helped make it more possible for workers to choose to work part-time because they don’t need to depend on a full-time job for insurance. After being stable for many years, the number of Americans voluntarily working part-time jumped by a remarkable 9.5 percent from 2014 to 2016.
The ACA Is One Key Strategy to Stabilize the Gig Economy
Traditionally, employers provided health benefits as an incentive to recruit and retain their workers. But the future of work has arrived, and increasing numbers of Americans do not have the traditional employer/employee relationship. Harvard economists Lawrence Katz and Alan Krueger found that the the percentage of workers working in contingent employment relationships rose from 10.1 percent to 15.8 percent from 2005 to 2015. This includes the self-employed, those who work through temporary help agencies or other outsourced employment providers, and those who work for gig economy companies like Uber, Handy, or Lyft.
This change in work calls for a new social contract where benefits are portable and not tied to any specific employer. The ACA provides just that flexibility, providing consistent access to health insurance for workers who don’t have an employer to get insurance from. Not surprisingly, the percent of freelancers with health insurance jumped from 64 percent before the ACA to 82 percent afterwards. Altogether, one in five customers of the ACA health insurance exchange in 2014 were either self-employed or small business owners. While important progress has been made to develop portable benefits funds for the independent workforce to address shortcomings in paid leave and retirement, none of these efforts approach the comprehensive portable health coverage provided by the ACA.
The BCRA Could End This Progress
The Senate plan to replace the ACA raises serious questions about the future of workers’ health care. The Senate bill would end Medicaid’s guaranteed funding streams, and instead give states the option to convert their Medicaid program into a block grant and waive current federal patient protection requirements. The Senate bill also proposes phasing out full federal funding for the Medicaid expansion in 2020. After that, it would convert Medicaid from an open-ended entitlement and cap growth in spending at a rate much lower than medical inflation. With a declining amount of funds from the federal government, a likely outcome of the BCRA would be for states roll back or eliminate Medicaid benefits for working adults. The Congressional Budget Office estimates that a total of 15 million fewer American would be on Medicaid if the expansion funding ends and the BCRA’s cost-cutting provisions go into effect.
With a declining amount of funds from the federal government, a likely outcome of the BCRA would be for states roll back or eliminate Medicaid benefits for working adults.
The plan makes low-wage workers eligible for a tax credit rather than Medicaid. It’s important to note that the BCRA also only sets the tax credit at the level of a bronze health plan (the least comprehensive on the Marketplace). Those plans currently have a deductible exceeding $6,000 per year. Moreover, the BCRA would eliminates subsidies for deductibles and copays for low-income individuals. For low-wage workers, having an insurance plan with a $6,000 deductible is like having no insurance at all. And independent workers who might be able to afford insurance would encounter a new six-month waiting period to apply for insurance—and the bill grants states new authority to water down insurance protections, as well.
The ACA has provided urgent help to low-wage workers who were locked in jobs for fear of losing health coverage, and has given others access to quality health care if their employer provided no coverage. These hard-won gains for the nation’s most vulnerable workers should not be lightly reversed.