But if independent workers live in New York, New Jersey or Oregon, they will soon have a new option when it comes to obtaining coverage thanks to the Affordable Care Act (aka Obamacare to its detractors) and the Freelancers Union. The organization, which currently has 170,000 members, was recently awarded $340 in low or no-interest federal loans through the Centers for Medicare and Medicaid Services to launch “consumer operated and oriented plans,” or Co-Ops that are open to everyone, including independent workers who typically struggle to find affordable coverage. The new plans will be non-profit and will be run by a local CEO and board of directors in each state.

The Co-Ops are set to begin enrolling members in the fall of next year and to begin offering benefits in January 2014. The Freelancers Union already covers around 23,000 workers and their family members in New York States through its existing insurance offerings, but anticipates covering an additional 200,000 workers across the three states within five years.

By cutting out the for-profit health insurance industry out of the equation, Co-Ops are intended to return insurance to its roots, in which workers pooled risk and supported each other. And by competing with private plans, the Co-Ops should also drive down costs for patients. “Co-Ops will promote competition in the insurance market and respond well to the health care needs of Americans,” according to Marilyn Tavenner, acting administrator of the Centers for Medicare and Medicaid Services.

“It’s like venture capital for healthcare,” said Sara Horowitz, executive director of the Freelancers Union. “By empowering nonprofit social entrepreneurs to compete with private insurers, Co-Ops provide a powerful new tool to bring more affordable options to the most people.”

Do you think the Obama administration’s healthcare reforms are the solution to independent workers’ health insurance woes?

Image courtesy of Flickr user Images_of_Money.

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“While coworking spaces might come pretty close to the ideal working space, at times they can also be spaces where some of the worst characteristics of a capitalist economy are being reproduced — just like in an ordinary workspace,” she writes. Independent work may solve many problems, but it doesn’t get rid of asymmetric relationships between those handing out work and those completing it, she states. What does she mean by this?

If there is a big difference between the partners in a work relationship, sometimes the stronger party gets all the advantages and benefits, while the weaker party has to bear the full risk and disadvantages.

Usually the strong partner is someone who is established and well connected. Often these people or companies are very good at communicating and selling, they act mainly as project managers, while contracting out the actual development or design work to other people. The subcontractors in turn are often newcomers who don’t have a big network, who are rather inexperienced and not as good at selling themselves and their work. Usually these people are happy that someone subcontracts them work and they don’t have to spend time on acquisition, communicating and networking. The relationship between the main contractor and the subcontractor can be win-win situation, but rather often it is not.

The result of this unequal balance of power, Pohler claims, can be impossible deadlines, insane hours, failure to pay for revisions to a project and extremely long lag times before payment for subcontractors. And coworking spaces, she feels, may be inadvertently making the problem worse. “It is easy to find young, skilled and motivated people as subcontractors, and it is easy to build relationships on the assumption that everyone is more or less the same and equal,” she writes.

Pohler may diagnose the problem in her article, but when it comes to solutions, she simply advocates for greater discussion of the issue and more openness in the community.

Is that an adequate solution, or do you think independent workers need to do more to protect themselves?

Image courtesy of Flickr user JD Hancock.

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Elance’s look back at the year reveals that online hiring has soared more than 100 percent from 2010, and the number of professionals working on the site is up more than 120 percent. Cumulative earnings this year should surpass $500 million.

And like his oDesk counterpart Gary Swart, Elance’s CEO Fabio Rosati (who is speaking at Net:Work Thursday) doesn’t feel the economic doldrums are the sole cause of the growing attraction of online labor platforms. What is? Structural change to work, Rosati told us in an interview:

The state of [the] economy and unemployment is acting as a catalyst. It’s forcing a large portion of the workforce to look for alternatives. It’s forcing business to remain more flexible. But what we’re seeing is a change in how work is done and it’s similar to commerce. What caused e-commerce? Did the rise of e-commerce result from problems in the economy? Not really.

E-commerce started to be more effective in some categories than regular commerce, and I think that’s exactly what’s happening in the world of work. Working online in many ways is more efficient, more effective and more immediate than traditional employment. Businesses that use the flexible work model have distinct advantages over businesses that don’t, and there are some departments within these companies that have always used a flexible work model anyway. Creative departments, marketing departments [and] IT departments have always approached talent in a very flexible way on a project basis. They’re just doing it online now. So I don’t think we’re going back. I think this is really structural.

And while some may feel this shift towards global, online labor platforms undermine American workers by opening them up to competition from lower wage workers abroad, Elance is predicting in its report that professional services will become “America’s next great export.”

“The global demand for US talent has increased steadily over the past year and is set to grow even faster as online platforms like Elance break down global barriers,” says the release that goes along with today’s numbers. But Rosati is a little more understanding of those who feel the rise of these platforms is a mixed blessing for American workers.

When you create a global workplace and a global workforce, the dynamics are very different. Suddenly, you have a lot more competition cross-border. I know that is a very strong reality, and at the same time, there’s the other side of it, which is that for the first time, a very capable, talented, U.S.-based professional can access work and have clients all over the world, and we’re seeing exactly that on the U.S. platform. I feel that it’s an important side of what’s happening, because Americans have amazing talents. We’re seeing companies that may be hiring in some parts of the world for certain types of tasks, but for others, they love the opportunity to hire people based in the U.S.

I don’t doubt there are strong pressures when you compete with someone who is living in another part of the world. For example, it doesn’t even have to be someone who is in a lower-wage country. It could be simply someone who has access to public health insurance. So if you’re working in the U.S., and you have to pay for your own health insurance, you may be at a disadvantage to someone living in Norway who absolutely doesn’t because it’s all covered by the government. So that dynamic is definitely real and a challenging aspect of what is happening, but there are also many positive things.

You have to hand it to Rosati for acknowledging that, for all the psychological and lifestyle benefits of independent work, it does offload tasks and expenses ( (like obtaining health insurance, dealing with tax issues and building retirement savings) entirely onto the worker. Also to Elance’s credit is their partnership with eHealth to help U.S. community members compare health coverage options. “I wish I had the magic wand to address the problem, but I don’t,” says Rosati.

But health insurance isn’t the only external cost shifted from employer to worker in the paradigm shift these platforms are pushing. Though Elance clearly tries to make verifying work, billing for it and sorting out logistics as simple as possible with everything from an internal file management system to built-in virtual meeting facility, one can’t help but feel independent workers are more burdened with what Craig Lambert recently dubbed “shadow work” in the New York Times.

Lambert defines the term as “all the unpaid labor — including, for example, housework — done in a wage-based economy,” and muses that all of us, not just independent contractors, are being saddled with more and more of it in the name of corporate profits:

Science fiction novels of a half-century ago dramatized conflicts between humans and robots, asking if people were controlling their technologies, or if the machines were actually in charge. A few decades later, with the digital revolution in juggernaut mode, the verdict is in. The robots have won. Although the automatons were supposedly going to free people by taking on life’s menial, repetitive tasks, frequently, technological innovation actually offloads such jobs onto human beings.

The conventional wisdom is that America has become a “service economy,” but actually, in many sectors, “service” is disappearing. There was a time when a gas station attendant would routinely fill your tank and even check your oil and clean your windshield and rear window without charge, then settle your bill. Today, all those jobs have been transferred to the customer.

From automated airport check-in terminals and the near extinction of travel agents to understaffed retail outlets where we find our size ourselves, more and more places are shifting work, with all its attendant costs in time and energy, from companies to individuals, argues Lambert. In its well-intentioned way, Elance and its competitors appear to be doing the same.

Do the larger markets for our services and increase in lifestyle flexibility make up for these extra costs?

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Freelancers typically have difficulty securing access to a comparable range of benefits to what they’d have in an employment situation. This is especially true of health benefits, as I’ve written previously.

How is oDesk trying to fix this? oDesk Staffing extends its existing 1099 system by letting you elect to have a W-2 employed relationship status with the company.

Workers who opt for a W-2 status and who complete 30 hours per week of billable work through the oDesk system are eligible for benefits from oDesk Staffing. The benefits include group health benefits with no pre-existing condition limitations, retirement benefits and even unemployment benefits. oDesk also guarantees payment from clients for work, but the trade-off for that guarantee is that the oDesk system requires that you use monitoring software during work hours that some freelancers might consider intrusive (including the use of webcam shots).

Eligibility for benefits relies on an hourly calculation, so workers who get paid using other measures, such as writers getting paid by the piece, won’t be eligible for the oDesk Staffing benefits system. Workers become eligible for benefits on the first day of the month following a month where they they have worked 30 hours a week. This means workers have to wait between 31-61 days to become eligible for benefits under the oDesk Staffing system.

What will all of this cost? For existing oDesk users, oDesk Staffing’s examples say that after taxes and their fees, the take-home pay of the producer will be the same under a W-2 relationship as under the existing oDesk 1099 system. Freelancers considering porting their existing client relationships to oDesk to take advantage of the benefits should know that oDesk Staffing charges a 20 percent fee for their services that includes the worker’s tax withholding. For a worker who can’t secure insurance any other way, that may be a necessary premium to pay.

oDesk Staffing isn’t publishing information on the cost of the health insurance premium buy-in itself. It is available via email from getbenefits@odesk.com, though. There are nine different plans. On the web site, sample rates are quoted for the Basic PPO plan at $135 per month for an individual 35-year-old, or $400 per month for a family.

Would you bill all your clients through a service in order to get health insurance?

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What exactly is the current state of health insurance for the freelance worker in the United States? There are two key issues to consider: access and affordability.

If you are young and healthy by insurance company standards, you can try to buy an individual or family insurance policy. These policies are purchased as individual contracts from an insurance company, as compared to becoming a group member of an insurance pool that is contracted by an employer or other entity. Anne previously provided some tips about shopping for these policies.

There are a few ways that freelancers can get into health insurance buying groups to get lower rates. Some trade groups, local chambers of commerce, and advocacy groups such as the National Association for the Self-Employed offer discounts on purchasing insurance policies as a member benefit. These programs come with the restriction that people wanting to sign up must meet the health standards of the health insurance company to be eligible for the insurance. One notable exception is a program run by the Freelancer’s Union, which is only offered in the state of New York, and which accepts everyone who meet the group’s membership standards.

If you are self-employed because you own a small business, you may be able to get group rates (and tax benefits) by forming your own small group. You’ll need two or more people who are employees of the business to form a group in most states.

To purchase an individual health insurance policy, applicants have to go through a process called medical underwriting. The insurance company uses this screening process to evaluate the financial risk that you (and anyone else that will be on your policy) pose to them. After filling out your application and health history, the insurance company decides if it can insure you at all, and, if so, what rates it can offer you based on your financial risk.

A wide range of medical conditions can cause an applicant to flunk medical underwriting and be denied insurance coverage altogether. Other conditions can result in insurance rates being set ridiculously high; out of reach for most people. Medical underwriting is fairly standard across the industry, thus creating a class of people who are completely uninsurable in the private insurance market.

Some states have created government programs called high-risk insurance pools that sell insurance to people ineligible to purchase insurance through the open market because of underwriting rejection. These pools are expensive, though: members pay premiums that are usually capped at between 150-200 percent of the average market rate.  The programs are usually subsidized by the state’s taxpayers. Around 30 states offer these pools, but the quality of the offerings of the programs vary widely.

Once you have health insurance, then you face the next challenge: keeping that insurance when you need it most. Individual insurance policy holders don’t have the protection of an employer group contract requiring the insurance company to insure them (called mandatory enrollment) to keep an insurance company from canceling their policies. This means that if you are a private insurance policy holder and you actually start needing your insurance, you may find the company using a process called rescission on you.

In health insurance, rescission happens when an insurance company wants to rid itself of a policy holder that is costing it money in large claims. The entire life history of insurance claims of everyone on the policy are examined in detail, looking for any pre-existing diagnosis that wasn’t reported on the policyholder’s application. It then uses this lack of disclosure of any condition, no matter how minor or unrelated to the current claims that are costing it money, to declare the policy void. Any diagnosis code for a chronic condition or risk factor ever recorded on a claim form by a doctor’s office could be grounds for voiding a policy if that condition wasn’t included on the policy’s application form. Forgetting to disclose your spouse’s deviated septum could be used as grounds to cancel your family’s policy if you need expensive cancer treatment.

There a few exceptions to all of these underwriting procedures and rescission concerns: if you live in Massachusetts, New York, New Jersey, Maine or Vermont, your state prohibits medical underwriting, according to ehealthinsurance.com.

I’ve personally experienced the effects of medical underwriting. I have multiple health conditions that are considered completely uninsurable by health insurance companies. Several times, when I have been cold-called by insurance agents who got my business registration information, I have literally been hung up on in mid-sentence the moment the agent heard the word “lupus” come out of my mouth. They knew they couldn’t sell me a policy so I was a waste of time and they moved on to the next prospect without even a polite sign-off.

Because of all of the things I described above, access to and the cost of health insurance should be a serious concern contemplated by anyone considering freelancing. It can prevent web workers from even being able to consider becoming self-employed, or force them back into working for someone else, because of the change in health status of themselves or a family member. For people who are already self-employed, maintaining health insurance is probably an ongoing concern. Last year, Mike reported that FreelanceSwitch research showed that only 31 percent of web workers in North America had health insurance.

Being young and supposedly healthy isn’t a reason to not worry about insurance. I was a young, healthy 18-year-old, right up until the day a blood test to determine if I had “freshman mono” diagnosed a serious blood disorder that is part of my lupus. Many Twitter users are familiar with the hashtag #blamedrewscancer. This meme sprang up after Drew Olanoff was diagnosed in May with Hodgkins Lymphoma and has become a LIVESTRONG fundraiser. Lightning can strike any of us in the form of a health crisis at any time. That is what insurance is for; if you can get it, and if you can afford it.

Do you have health insurance?

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But the health insurance outlook for the self-employed is not as bad as you might think. If you are reasonably healthy, you might be surprised how cheaply you can arrange coverage, especially if you choose a high-deductible health plan. And now that health insurers are looking for growth beyond their bread-and-butter large group policies, you could see even better rates as those insurers compete for your health coverage dollars.

The Wall Street Journal reports (behind the subscription firewall, unfortunately) that insurers are turning their attention to the individual insurance market as the large group plan market stagnates:

[Insurers'] core business — selling group plans to large employers — is stagnant. A Bain & Company analysis of the health-insurance sector shows that total commercial health-insurance enrollment has been flat at around 174 million people since 2001. In response to rising costs, employers have steadily pared back benefits, and the percent of businesses offering health insurance has fallen to 60% last year from 66% in 1999. Since the 2001 recession, the number of contractors, part-timers and small-business employees has grown two to six times faster than the economy overall. In contrast, traditional workers — the full-time company employees that provide the insurance companies’ bread and butter — have declined 0.6%. As a result, profit pools in corporate-funded health plans are shrinking.

So what does that mean for you? It depends. It depends on what health issues you and your dependents have, what state you live in, and even what coverage you’ve had in the past, because some legal guarantees only kick in if you don’t drop coverage for too long.

If you are looking for health insurance on the individual market, here are a few tips to guide you:

• Find a good health insurance broker. A broker who’s knowledgeable about individual policies in your area will be able to help you find just the right health insurance plan for your situation. They can easily check rates at multiple insurance companies, inform you about laws that might apply to your situation, and counsel you about your best course of action.
• Consider a high-deductible health plan with a health savings account. These plans feature high annual deductibles but allow you to establish a health savings account to which you contribute pre-tax earnings. Because of the high deductibles, the policies are usually quite a bit cheaper than regular policies. And the health savings accounts have a variety of nice features, including long-term accumulation of savings and tax-free interest if you don’t use up the money in the account. It’s a great way to save for future health expenses while keeping the lid on current expenditures for your insurance.
• Don’t drop coverage. Besides leaving you at risk for financial disaster should you have health problems while uncovered, it also means that if you later get coverage through an employer or other group plan, the insurer may not have to cover pre-existing conditions. The Health Insurance Portability and Accountability Act (HIPAA) says that if you maintain coverage without a significant break (generally defined as 63 days or more), a new group insurer cannot exclude pre-existing conditions, although an individual insurer may be able to, depending on your state’s laws. Always maintain coverage, even if you do so with the most bare bones of policies.
• Consider COBRA health coverage continuation only as a last resort. The federal Consolidated Omnibus Budget Reconciliation Act provides for continuation of group health care coverage for up to 18 months (or longer if you are disabled) after you leave a job. Although it will cover you if you have no other options, it is time-limited and often very expensive. Do use it to keep unbroken coverage if you need to while waiting for eligibility for another plan, though.

For more advice on health insurance for the self-employed, check our open thread where readers shared their experiences. And let’s hope that America’s next president takes decisive action to help those who cannot obtain affordable health coverage for themselves and their families, even as we each (I hope) find the coverage we need for ourselves and our families.

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