#obamacareselfemployed

August 6, 2018

Trump is making good on his campaign promise to create more jobs - unemployment at 3.9% is at an all-time low - and grow the economy - GDP growth of 4.1% during the second quarter of 2018 is the highest rate since the third quarter of 2014. He's having a bit more difficulty fulfilling his pledge to dismantle the Affordable Care Act (ACA), which is probably in his favor as there may be unintended consequences if the ACA is rolled back.

Shortly after the ACA was enacted in 2013, there were all kinds of theories about how accessibility to affordable health care coverage would positively influence the number of self-employed individuals. It seems reasonable to think that the number of self-employed individuals would rise if the worry of accessing and paying for healthcare insurance for themselves and their family were erased. I'm sure everyone knows of someone who has foregone an opportunity to be self-employed because they didn't feel that they could risk leaving their corporate-paid health care benefits. The stories of families facing financial bankruptcy due to uninsured health care claims can certainly crush one's entrepenurial spirit. And as a country that prides itself as a harbinger of innovation, I would think that our leaders would want to support a culture of entrepreneurship.

According to the OECD, the US and Russia have the lowest rate of self-employment at 6.5% and 7.2%, respectively, while Greece, Turkey and Mexico have the highest rates of self-employment at 35.4%, 34.0% and 32.1%, respectively. So apparently the correlation between the health of an economy and the level of self-employment seems to be a negative one.

Not only do self-employed individuals benefit from affordable, accessible health care coverage through the ACA, so do contingent workers. The U.S. Bureau of Labor Statistics defines contingent workers as persons who do not expect their jobs to last or who report that their jobs are temporary (think Uber drivers). Note the use of the term "worker", and not "employees". Contingent workers are not employees, and therefore aren't eligible for an employer's benefits program such as health insurance. And employers who tap into this pool of contingent workers benefit greatly, as they can structure their workforce on an as-needed basis, which should support innovation and enhance efficiencies.

So, has the rollout of ACA marketplace plans in 2014 positively impacted the number of self-employed individuals and contingent workers? A rose-colored CNBC article from January 2017 titled Small-business owners and self-employed more likely to buy Obamacare plans states "One out of every 5 Obamacare customers — 1.4 million people — was a small-business owner, self-employed or both, in 2014, the first year Affordable Care Act plans were available, a government report issued Thursday reveals. The same Treasury Department report also found that workers whose incomes were not primarily from wages were almost three times more likely to buy health insurance coverage from an Obamacare exchange than wage earners in 2014." This sounds pretty positive, that the ACA marketplace is drawing more self-employed workers than your traditional employee. Somewhat of a "duh" statement, but I'll be 'glass-half-full' here.

Another stat from the same government report sheds a different light on the perceived value of Obamacare amongst the self-employed population: "among workers whose income was not primarily from wages, almost ten percent purchased insurance through the ACA's Heath Insurance Marketplaces; such workers represented about 28 percent of all workers (excluding dependents or non-working spouses) with Marketplace coverage." Said another way, only ten percent of workers whose income does not come from wages enrolled in an ACA marketplace plan. That sounds pretty low to me, and suggests that health care insurance is not a "missing link" in driving self-employment. This statistic is from 2014, the first year of ACA marketplace plans, and there is a chance that enrollment figures have increased. Unfortunately I’m not able to find an updated version of this particular metric.

Back to my question about whether the prevalence of self-employed and contingent workers has changed since the implementation of ACA . . .

According to the Department of the Treasury's Office of Tax Analysis Working Paper from January 2017, the number of individuals who filed a return and reported the operation of a nonfarm sole proprietorship increased 34% from 2001 to 2014. I'm not a fan of this particular statistic, because there's no indication of when this increase occurred, and thus there's no way to know if there's a correlation between the rollout of ACA and this particular metric.

Per the U.S. Bureau of Labor Statistics, contingent workers accounted for 1.3 percent (2M) to 3.8 percent (5.9M) of total employment in May 2017. In February 2005, the last time the survey was conducted, contingent workers comprised 1.8 percent to 4.1 percent of employment. So the penetration of contingent workers has declined, in spite of what intuitively appears to be an increase of the "gig economy".

In January 2018, NPR had a series about the rise of the contract workforce: “a new NPR/Marist poll finds that 1 in 5 jobs in America is held by a worker under contract. Within a decade, contractors and freelancers could make up half of the American workforce.” (i). Going back to the Bureau of Labor report, contingent plus alternative workers make up just under 14% of the US workforce.

I don’t think we can answer the question on whether ACA Marketplace plans have had an impact on the prevalence of self-employed or contingent workers because of the lack of historical information on how the prevalence of this workforce has changed. We may be suffering from a lack of clear and consistent definitions of who these particular workers are, and therefore our government number crunchers are spewing out different results that what surveys otherwise suggest.

If the Trump administration is trying to get their arms around the type of worker that will ultimately drive the economy of the future, I think they should take seriously the survey data suggesting that a growing number of individuals identify themselves as freelancers. With that in mind, policy makers will have to decide the implications of having - or not having - access to affordable health care coverage. Does it really make sense to have a talented freelance individual who can make a positive impact on their community decide to spend their precious time working a retail job because of the health care benefits?