Will Uber Have To Provide Health Insurance To Its Drivers?

ThinkstockPhotos-468971613Until recently, Uber, a transportation network company, has been a proponent of the Affordable Care Act (ACA) and particularly the opening of the federal and state-based exchanges. Why? Since Uber does not offer health insurance, the exchanges provide an easy avenue for their drivers who are currently classified as “independent contractors” to get access to individual health insurance policies. Not having access to insurance was often a barrier for some who were considering becoming an Uber driver.

Another bonus for Uber is, by not offering and paying for health insurance, they have a competitive business advantage since health insurance can be a significant cost to organizations after payroll expenses.

Uber’s feelings toward the ACA may shift as the company could find themselves on the other side of the law. In California, the Labor Commission ruled in favor of a driver, defining the driver as an employee and not an independent contractor. While this is just one driver and Uber is appealing the decision, this could lead to larger ramifications for the company in the future if the ruling in California is seen as a precedent.

If all Uber drivers are deemed employees versus contractors, then Uber would have to offer benefits to all of the full time drivers or face a significant penalty under the Employer Shared Responsibility provisions under the ACA. One way or another, this will drive up Uber’s operating costs considerably, not to mention the additional costs associated with social security, workers compensation and unemployment insurance for these employees.

Bottom line, if Uber is required to offer benefits, it could adversely impact the drivers. Drivers may end up taking home less pay because of the added cost of health insurance or facing a reduction in hours. Under the ACA, benefits only must be provided to full time employees. There is nothing to prevent Uber from transitioning all of its drivers to part time employees.

It will be interesting to see how the appeal in California plays out as it could mean many more challenges for Uber ahead.

Is your organization offering coverage appropriately as required by the ACA? If you’re not aware of the rules for full time employees or want to brush up on your knowledge, check out our on-demand presentation below.

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