App-based companies pushing Prop. 22 say drivers will get health benefits. Will they?

App-based driving services such as Uber, Lyft, DoorDash and Instacart are bankrolling California's Proposition 22, which would keep their drivers classified as independent contractors, not employees.

Leading into the Nov. 3 election, the ballot measure — which has become the most expensive in state history — is mired in controversy and the subject of a lawsuit from Uber drivers alleging that the company inappropriately pressured them to vote for the initiative.

But what's occasionally lost in the debate over Proposition 22 are the claims about what it will mean for app-based drivers.

Detractors, like unions and driver advocacy groups, say Proposition 22 would strip drivers of the protections of AB-5, a 2019 California law delayed by legal challenges. The law requires drivers to be classified as employees, which would afford them the associated benefits like paid sick leave, workers' compensation and access to unemployment insurance.

Supporters, such as ride-sharing companies and the California Chamber of Commerce, say Proposition 22 would give drivers benefits, like a guarantee of minimum earnings and compensation when they are hurt on the job, while allowing them to maintain the flexible schedule of independent contractors.

In an online ad paid for by Lyft, the company says "Prop. 22 will give them … health care benefits."

That sounds like drivers with Uber, Lyft and other app-based companies will automatically get health insurance if Proposition 22 passes. The truth is a little more complicated.

What does 'health care benefits' mean?

We reached out to Lyft to back up its claim, and the company directed us to the "Yes on 22" campaign. This is how the campaign explained "health care benefits":

Under Proposition 22, drivers who qualify — more on that in a minute — would get a stipend they could use to buy an insurance plan from Covered California, the state's health insurance marketplace.

That stipend would be calculated like this: App-based companies would look at the statewide average monthly premium of bronze-level plans sold on the Covered California exchange.

The companies would then give qualified drivers a stipend of 82% of the average premium, said Geoff Vetter, a spokesperson for the Yes on 22 campaign. (On average, U.S. employers covered 82% of premiums costs for single coverage in 2019.)

So hypothetically, if bronze plans cost an average of $100 per month, Uber, Lyft or a similar company would provide qualifying drivers with $82 per month.

Drivers would be eligible for the full stipend — all $82 in the hypothetical case — if they average 25 hours per week of "engaged" time, which is time spent driving while there's a passenger in the car. Time spent driving between passengers would not count.

"Most drivers work part time" and spend about one-third of their time waiting for rides and deliveries, according to the nonpartisan state Legislative Analyst's Office. Using that equation, drivers would need to work an average of 37.5 hours per week for a single company in order to receive the full stipend.

A driver who averages at least 15 but less than 25 hours of engaged time each week would be eligible for 50% of the stipend — or $41 per month.

The stipend would be similar to employer-sponsored insurance because both employers and employees would contribute to the cost of insurance, Vetter said.

"For the people who do work closer to full time, it does give them that ability to receive health care coverage by getting a typical employer contribution for that coverage," Vetter said.

Does a stipend equal coverage?

But this stipend bears little resemblance to traditional employer-based insurance, which is what drivers would get if they were considered employees instead of gig workers, said Ken Jacobs, chair of the University of California-Berkeley Center for Labor Research and Education.

"It has very, very little relationship to what anyone would think of as job-based coverage," Jacobs said. "It's really wrong to think of this as health insurance."

For instance, under Proposition 22, the stipends would be calculated and distributed quarterly, based on drivers' hours. That could force drivers to periodically reassess what kind of coverage they would qualify for and could afford.

With traditional employer-sponsored insurance, a driver would enroll in a plan once per year and the premium wouldn't change.

A vacation or illness could mean that drivers can't maintain the hours required by the measure, costing them their stipend — and perhaps their insurance — for the quarter, and stripping them of the stability usually associated with job-based coverage, Jacobs said.

And getting money to buy an individual plan isn't the same as participating in a large group plan offered by an employer, said Jen Flory, a policy advocate at the Western Center on Law & Poverty, a nonprofit organization that advocates for low-income Californians and opposes Proposition 22.

Covered California plans are typically less generous than the policies employees usually get through work, she said. And bronze-level plans, which have the lowest monthly premiums, also have the highest out-of-pocket costs for medical services.

Consider the deductible, which is how much a person needs to pay out-of-pocket before insurance starts paying for care.

The deductible on a Covered California bronze plan for an individual in 2021 will be $6,300 for medical services plus $500 for prescription drugs. Proposition 22 ties the stipend "to the highest deductible, highest out-of-pocket plans on the market," Flory said. "And it's for workers who aren't making a whole lot of money."

Drivers could use the stipend to buy a more generous plan, but the monthly premium would be higher and the stipend would cover less of it.

Depending on their incomes and other factors, drivers may also be eligible for tax credits and state and federal subsidies to help them afford plans on the individual market. But Flory said this amounts to the government subsidizing health insurance that employers should be paying for themselves.

It's also problematic to base the stipends on a statewide average of bronze premiums because that doesn't take into account the huge regional differences in the cost of care, said Gerald Kominski, a senior fellow at the UCLA Center for Health Policy Research.

"In the Bay Area, that contribution is going to buy a lot less than it would in Southern California," Kominski said. "We're a big state and have a lot of variation of health care costs."

Our ruling

The stipend offered under Proposition 22 is a "health care benefit," but the wording is misleading and ignores critical information.

While neither Lyft nor the Yes on 22 campaign says the proposition will give drivers health insurance, saying that it will offer them "health care benefits" gives the impression that the stipend is similar to traditional job-based coverage. It's not.

Drivers who value the ability to make their own schedules would have to figure out how to work an average of nearly 40 hours a week — essentially full time — to receive the full stipend. The stipend would cover a fraction of the premiums for health insurance that's typically less generous than what they'd get as employees.

Moreover, because drivers' stipends could change quarterly based on their driving time — which could be affected by vacation or illness — any coverage purchased with the stipend could carry a cloud of uncertainty.

We rate this claim as Half True.

This KHN story first published on California Healthline, a service of the California Health Care Foundation.