Why Don’t Companies Offer Healthcare Benefits to Independent Contractors?

 

I found this on buzzfeed, while doing academic research for this blog post.

In the business world, it’s not quite as funny when good intentions are misunderstood. Which is why companies generally can’t offer healthcare benefits to independent contractors. Even if they would like to, they can’t.

Good intentions would be misunderstood, and the effect of offering healthcare coverage to independent contractors would likely be that they are turned into employees.

Why?

The law limits who can sell health insurance coverage. You need a license. It’s the same reason I can’t work as an Aquatic Antifouling Paint Operator in New York State. If you want to commercially apply antifouling paints, which are pesticides, on vessel hulls, boat bottoms, or other other marine surfaces to inhibit the growth of aquatic organisms, you need an Aquatic Antifouling Paint Operator license. (Apply here.)

Companies that aren’t licensed to sell healthcare insurance can’t go around selling healthcare insurance. But there’s a narrow exception, which allows companies to offer healthcare insurance to its employees. The exception doesn’t extend to vendors, suppliers, or independent contractors. Only employees.

Some of the large rideshare app companies have advocated for legal reform that would allow them to offer more benefits to independent contractor drivers. But there’s not much they can do right now. Companies without a license to sell healthcare insurance can only offer healthcare insurance to its employees, not to independent contractors.

Some companies have begun to get creative in an effort to offer more benefits to independent contractor drivers. According to benefitsnews.com, some app companies are beginning to offer limited benefits, such as access to accident insurance, free online college courses, and professional certifications.

Some states, such as New York, have considered legislation that would expand the availability of benefits to independent contractors, but the current state of the law severely restricts what companies can do.

The legal problem for companies who want to offer more benefits to contractors is not just that they can’t sell healthcare insurance to non-employees. It’s also that the more benefits they offer to contractors, the more those contractors may start to resemble employees. Since U.S. law currently sees the Employee vs. Independent Contractor issue as binary — you can only be one or the other — companies who offer increased employee-like benefits to contractors run the risk that the contractors will be deemed their employees, which creates a whole big mess of other legal problems.

A company might wish to provide healthcare coverage to independent contractors, but the company’s good intentions would be misunderstood. Which is also why if you want a haircut and dye, you should just type it into your phone’s calendar instead of just telling Siri.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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DOL: Association Health Plans Are Not Evidence of Joint Employment

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For some conditions, medical treatment will not help. For example, in 1979, Robert Palmer had “a bad case of lovin’ you” and no pill was gonna cure his ill. It is unknown whether this condition ever cleared up. At last report, Palmer had become addicted to love.

For those with conditions where pills can cure ills, or for those (like Huey Lewis?) who just want a new drug, medical coverage can be important. A new DOL rule allows small businesses to participate in Association Health Plans without exposing themselves to joint employer liability.

An Association Health Plan (AHP) is a group health plan that allows small employers to band together to purchase the types of coverage that are available to large employers, which can be less expensive and better tailored to the needs of their employees. AHPs can be formed based on common geography or based on a common industry or trade group.

The Department of Labor recently issued FAQs and a lengthy rule about AHPs, but for our purposes, one of the important pro-business features is that participation in an AHP cannot be used as evidence that the participant employers are joint employers under federal wage and hour law or employee benefits law.

The rule also recognizes that businesses may contract with individuals as independent contractors and that jointly participating in an AHP with these independent contractors does not make the business an employer or the contractor an employee.  The inclusion of independent contractors in an AHP is not evidence of misclassification.

The rule takes effect August 20, 2018.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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