Elaine Ditsler, Peter Fisher, Colin Gordon
On the Fringe: The Substandard Benefits of Workers in Part-Time, Temporary, and Contract Jobs, Elaine Ditsler, M.S., Peter Fisher, Ph.D., and Colin Gordon, Ph.D., The Commonwealth Fund, December 2005
In an era of increasingly unstable employment-based health care coverage, with fewer and fewer individuals covered under such policies and the quality of coverage diminished by higher premiums, copayments, and deductibles, nonstandard workers are particularly vulnerable. These workers are often left without the option of employer-based health care coverage, resulting in potentially high out-of-pocket costs. They are more likely than regular, full-time workers to be uninsured or to rely on insurance through a spouse's employer or through the government.
Nonstandard workers currently make up about 25 percent of the U.S. workforce, for a total of 34.3 million workers. Part-time workers compose the largest category within this group, followed by self-employed independent contractors and direct-hire temporaries. Nonstandard workers also include on-call and day laborers, temporary help agency workers, wage and salary independent contractors, and contract company workers.
Using data from the Contingent Work Supplement (CWS), an addendum to the U.S. Census Bureau's Current Population Survey, this report compares trends between nonstandard workers and regular, full-time employees. To fill in some of the gaps in the CWS, the authors conducted a survey of nonstandard workers in late 2003 and early 2004, the Iowa Policy Project (IPP) Survey of Fringe Benefits and Nonstandard Work.
While access to employer-sponsored health insurance is on the decline for all workers, it is an especially acute problem for nonstandard workers. In 2001, most standard workers (74%) had health insurance through their jobs, but only 21 percent of nonstandard workers did. As a result, nonstandard workers were uninsured at twice the rate of regular, full-time workers. Nonstandard workers also relied on government insurance at five times the rate of regular workers and were insured through a spouse's health insurance plan at three and one-half times the rate of regular workers.
In addition to being less likely to be offered employer-sponsored health insurance, nonstandard workers are also less likely to take up employer-sponsored coverage when it is available. About 87 percent of regular full-time workers are offered health insurance, compared with only 40 percent of nonstandard workers. Among those nonstandard workers who were eligible for employer-based plans, 54 percent elected to take it up. In comparison, the take-up rate for standard workers was 85 percent. Nonstandard workers who declined coverage said it was either because they had coverage through another source or because the plan was too expensive.
Families of nonstandard workers are also affected by their unstable insurance coverage. Only 15 percent of children and 16 percent of spouses of nonstandard workers had health insurance through the nonstandard worker's employer. In fact, children and spouses were covered by the spouse's employer at three times the rate that they were covered by the nonstandard worker's employer. Almost one of five family members of nonstandard workers was uninsured (18% of children and 16% of spouses). A substantial share—10 percent of children and 6 percent of spouses—relied on public health insurance for coverage.
Because of the rising cost of health insurance, some employers and individuals—both nonstandard workers and regular employees—are turning to low-cost products like high-deductible health insurance plans, limited health insurance, and medical discount cards. While these options can appear more affordable than comprehensive health insurance, coverage is often limited. The IPP Survey found that 18 percent of nonstandard workers had discount cards, but no insurance coverage. However, almost all these workers originally—and erroneously—reported that their discount card was a health insurance policy, leading the authors to suggest that rates of uninsurance may be underestimated because some individuals who report having insurance may, in fact, have discount cards only.
Improving access to health coverage for nonstandard workers will require addressing three issues: regulating employer-employee relationships to ensure that nonstandard workers enjoy the same individual and collective rights as conventional employees; strengthening the foundation of employment-based health insurance, thereby making it easier for employers to offer coverage and workers to afford it; and expanding alternatives to employment-based coverage, including existing public programs. Policymakers must identify the obstacles facing the uninsured and underinsured and each individual's potential for eligibility, according to income, job tenure, or firm size. The task, in short, is to provide nonstandard workers an "on-ramp" to group-based insurance—by increasing access to conventional job-based coverage, creating new purchasing pools, or expanding the reach of public programs.
Short of such far-reaching reform that provides universal coverage, the health care system faces tough choices. While it is expected that individuals will be covered under employment-based coverage, there is no requirement that employers provide it. Indeed, most employers—particularly those coping with smaller employee groups, rising health costs, and persistent competitive pressures—have powerful incentives to avoid this burden. Some have done so by dropping coverage, shifting more coverage costs to employees, or shirking conventional employee-employer relationships altogether. Incremental political solutions must address each of these problems and employ bold and inventive combinations to avoid further fragmenting coverage or shuffling those already insured from one program to another. Seamless access to group-based health coverage—for nonstandard workers and others—depends on transparent employer-employee relationships, secure and portable employment-based care, and tax-subsidized access to alternative insurance pools for those left behind.