It is hard to believe the Affordable Care Act (ACA) was enacted only six years ago. It represented a monumental shift for many Americans and has dramatically impacted the labor force. There is no question: By separating healthcare benefits from full-time work, the ACA has changed how freelancers and companies work. Companies are looking for ways to contain costs and rethink how they approach hiring, and freelancers are realizing they can work for themselves without giving up income or benefits.
We know this because freelancers and companies have told us. Together with Future Workplace, Field Nation surveyed more than 1,500 human resources professionals and freelancers. Both groups said the ACA has had a large impact on how they do work.
The ACA has played a significant role in the rise of the blended workforce. It provided the solution to job lock, a problem plaguing millions of Americans, and created more employer demand than ever before for freelancers and their skills.
Providing the key to employee job lock
Whether or not you have heard of job lock, you have probably been impacted by it.
In 2008, a Harvard Business School study estimated that 11 million Americans were affected by what economists call job lock—staying in a job they didn’t like or want just for the health benefits. Taking a pay cut for another position was one thing, but losing benefits was another. Many workers considered it too risky to leave their jobs when it meant leaving their health coverage, too.
Because of job lock, there were undoubtedly many people who wanted to work for themselves but couldn’t bring themselves to leave the security of their health coverage.
The ACA has changed that. As the New York Times described:
James Bailey, a graduate student in economics at Temple University, came up with a clever way to test that theory: he looked at what happened to 19- to 25-year-olds when the ACA made it possible for them to stay on their parents’ health insurance plans, beginning in 2010. Those who got the coverage, he found, were two to three times more likely to go into business for themselves. And that increase was largely driven by women, who are generally more risk-averse than men.
Bailey showed job lock wasn’t just a theory posited by economics. It was real, and the ACA found the key.
Many freelancers we surveyed said the ACA made it easier to be a freelancer.
“It made healthcare affordable,” said one.
Another freelancer did the math, saying, “It cut my health insurance cost from $17,000-plus a year to $8,000 a year.”
These freelancers demonstrate how the ACA separates healthcare benefits from traditional employment—to allow freelancers to pursue their passion.
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Of course, there are some freelancers for whom the ACA had no impact, such as those with pre-existing coverage through a spouse’s insurance plan. But many, many freelancers found relief from the ACA, some in unexpected ways. For example, 60 percent of freelancers said the ACA has affected their workload in various ways, such as by reducing their expenses or leading them to find more clients or work more hours.
In 2014, the Congressional Budget Office (CBO) predicted that “the ACA could influence labor productivity indirectly by making it easier for some employees to obtain health insurance outside the workplace and thereby prompting those workers to take jobs that better match their skills, regardless of whether those jobs offered employment-based insurance.”
It also estimated the ACA would reduce employment by 2.5 million full-time jobs, but not because firms would let people go. Rather, the CBO knew the ACA could reduce job lock and make it easier for workers to leave their jobs, whether they chose to go into freelancing or into retirement.
The ACA has provided the key to job lock. With their chains unlocked, more workers can choose to work for themselves. This is an encouraging trend not only for workers, but also for companies, which more and more often are looking for qualified freelancers.
Creating employer demand for freelancers
We asked 600 HR professionals and employers about the impact the ACA would have on their hiring. Sixty-eight percent said it will have a high impact on hiring more freelance workers, and 74 percent said they will contract more freelancers as a result of the ACA.
One-third of HR professionals intended to eliminate healthcare benefits because of the ACA. This starkly demonstrates how the ACA has decoupled healthcare from full-time work, driving companies to look for ways to contain costs and rethink how they structure their workforces.
One of the solutions they have come up with is to hire more freelancers, a trend that is accelerating. Sixty percent of HR decision makers intend to hire more freelancers in 2016 than in 2015. Nearly half (49 percent) say they intend to increase their hiring of freelancers by 30 percent or more.
Top-performing firms have already come to rely heavily on freelancers, creating new blended teams of full-time employees and freelancers who join on an as-needed basis. One in five top-performing firms say 40 percent of their workforce is already composed of freelancers, showing that using freelancers doesn’t have to compromise the success of a company.
For most companies and freelancers, the ACA seems to be a win-win: Companies will no longer have unsatisfied, unmotivated employees sitting at desks just to maintain their health coverage, and freelancers are free to pursue meaningful, interesting work providing them flexibility and health coverage.
In decoupling healthcare from full-time work, the ACA has rescued workers from the dreaded job lock, allowing them more choice and freedom, and made companies more willing to hire freelancers. It’s a better, healthier labor force for freelancers and companies alike.
Propelled by the momentum of the ACA, freelancers have a promising future, and shrewd businesses will use the blended workforce model to take advantage of their skills for their own organization’s success.
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