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.

In 2018, fewer than half of Californians who had work-based insurance had a deductible, and on average, that deductible was $1,402 for a single person, according to research from the California Health Care Foundation. (California Healthline is an editorially independent service of the California Health Care Foundation.)

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.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.

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Déjà Vu for California Voters on Dialysis

SACRAMENTO, Calif. — The survival of California’s dialysis clinics is in the hands of its voters this November.

Sound familiar?

Voters heard the same dire campaign claim two years ago, when the dialysis industry spent a record $111 million to defeat a statewide ballot measure that would have limited clinic revenues.

Industry giants DaVita and Fresenius Medical Care are back on the defense again this year with their checkbooks open, flooding voters’ mailboxes and screens with political ads highlighted by heartfelt testimonials from patients against Proposition 23. With just a week left before Election Day, the industry is on track to break its own spending record.

This time, the measure’s sponsor, the Service Employees International Union-United Healthcare Workers West, which represents more than 95,000 health care workers in California, focused the ballot measure less on dialysis clinic profits and more on patient safety.

The union, which has tried but failed to organize dialysis clinic workers, has been the driving force behind both ballot measures, putting voters squarely in the middle of a long-running brawl — and forcing them to make decisions that could affect the health of tens of thousands of Californians.

“There’s no reasonable evidence that this would improve patient health,” said Erin Trish, associate director of the University of Southern California’s Leonard D. Schaeffer Center for Health Policy & Economics. “It seems largely to be driven by retaliation by SEIU-United Healthcare Workers West, who are mad the dialysis facilities wouldn’t let their workers unionize.”

Proposition 23 would require dialysis clinics to have a licensed physician on-site during all dialysis treatments, but that doctor wouldn’t need to be a nephrologist, a kidney specialist. Clinics would have to report infection data every three months to the California Department of Public Health, and those that plan to close would need state approval.

About 80,000 patients visit the state’s 600 licensed chronic dialysis clinics, three-quarters of which are owned or operated by DaVita or Fresenius, the largest dialysis companies in the country, according to a report by the nonpartisan state Legislative Analyst’s Office.

Patients with kidney failure often need a dialysis machine to filter toxins and remove excess fluid from their blood when their kidneys can no longer do the job. The treatment is arduous, taking roughly four hours at least three times a week.

Dialysis patients are susceptible to infection for a variety of reasons: Their immune systems are already compromised by their kidney failure, they are around other sick patients while receiving treatment, they require catheters to access their veins, and their blood is cycled through a machine.

Even though mortality rates have dropped among outpatient dialysis patients nationwide, infections remain a leading cause of death. In California, about one-third of outpatient clinics have fallen short of federal performance standards so far this year, resulting in lower Medicare payments to those clinics, according to federal payment records.

“With this initiative, we’ll make sure that they put more of those huge profits back into the clinics to improve safety and improve care,” said Steve Trossman, spokesperson for the union.

Dialysis clinics are once again threatening to close if the measure passes and they’re faced with higher operating costs.

Shama Aslam, 50, spoke at the behest of the union. Aslam, who visits a dialysis clinic in Stockton three times a week, described swatting fruit flies off her face and arms for hours while hooked up to a dialysis machine. She has polycystic kidney disease and has been waiting three years for a kidney transplant.

“It was really bad today,” Aslam said on a recent October afternoon. “It’s very uncomfortable. And because we’re dealing with blood all the time, we don’t want any infection. That’s a huge thing, at least for me.”

Aslam wishes she could see a doctor more than once a month. Nephrologists oversee their patients’ dialysis care, but clinic staff members administer the treatments. Federal regulations require a medical director, who is a board-certified physician, to oversee every dialysis clinic in the country. But there is no requirement that those directors remain physically present at the clinic when it is open. That’s what the California ballot measure would mandate.

Rick Barnett, chief executive officer and president of Satellite Healthcare, which operates 80 dialysis clinics in Texas, Tennessee, New Jersey and California, including Aslam’s clinic, said he had not heard of fruit flies at that Stockton facility. Medicare has not penalized that clinic this year, according to the payment database.

Many nonprofits like San Jose-based Satellite Healthcare could not afford to hire on-site doctors if Proposition 23 passes, Barnett said. Currently, medical directors often oversee multiple clinics in addition to their other job responsibilities.

The Legislative Analyst’s Office estimated it would cost each clinic several hundred thousand dollars a year, while the industry says $600,000 a year. Each clinic likely would have to hire more than one doctor to cover all hours.

Barnett estimates Satellite would close up to 40% of its 67 clinics in California should the ballot measure pass.

“It comes down to an attack on the industry,” he said. “This is one of the few sectors of health care they haven’t organized.”

Trossman vehemently disagreed that the union is trying to punish the dialysis companies over its failed unionization effort, saying the union invests in improving people’s lives.

“In terms of the idea that we would spend millions of dollars because essentially we’re ticked off is just ludicrous,” he said. “We don’t spend money that way.”

The California Medical Association, which represents physicians, opposes the measure, saying it would exacerbate the state’s doctor shortage by diverting physicians into dialysis clinics.

“This will bring physicians who are not trained in kidney disease or dialysis to just be present without any role or purpose, or even a clear path to any intervention because they won’t know what to do,” said Dr. Edgard Vera, a nephrologist and the medical director of DaVita dialysis clinics in Southern California’s High Desert towns of Hesperia and Victorville.

Critical emergencies, such as wild swings in blood pressure, already are handled by technicians and nurses certified in dialysis care, Vera said. Should a patient go into cardiac arrest, “if a physician is there, they are going to call the ambulance anyway,” he said.

DaVita alone had given nearly $67 million to the “No on 23” campaign as of Wednesday, more than half of the $105 million raised so far by the industry, according to campaign finance reports filed with the California secretary of state. The campaign’s other contributors include Fresenius, Satellite Healthcare, U.S. Renal Care and Dialysis Clinic Inc.

The “Yes on 23” campaign has reported just a fraction of that, with nearly $9 million in contributions. SEIU-United Healthcare Workers West gave the bulk of the money, with the rest — about $40,000 — coming from non-monetary donations from the California Democratic Party.

Proposition 23 follows an uneven record of wins and losses for the union on dialysis issues in California. The union tried but failed to organize dialysis workers three years ago, arguing that they needed safer working conditions and job protection. It also lost its 2018 ballot initiative that would have capped dialysis clinic profits.

But, last year, the union helped persuade state lawmakers to adopt a bill that aimed to stop a billing practice dialysis companies use to get higher insurance reimbursements for some low-income patients. A federal judge in January temporarily blocked the law from taking effect while the court considers its constitutionality.

“It’s not unusual for us to be voting on similar issues over and over again if they’re backed by powerful enough interests,” said Danielle Joesten Martin, associate professor of political science at California State University-Sacramento, pointing to other repeat ballot measures on the November ballot, such as the Realtor-backed Proposition 19. That measure would give Californians over 55 years old a property tax break when buying a new home.

They’re “powerful interest groups who didn’t get what they wanted the last time around.”



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

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.

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Californians Asked to Pony Up for Stem Cell Research — Again

SACRAMENTO, Calif. — In an election year dominated by a chaotic presidential race and splashy statewide ballot initiative campaigns, Californians are being asked to weigh in on the value of stem cell research — again.

Proposition 14 would authorize the state to borrow $5.5 billion to keep financing the California Institute for Regenerative Medicine (CIRM), currently the second-largest funder of stem cell research in the world. Factoring in interest payments, the measure could cost the state roughly $7.8 billion over about 30 years, according to an estimate from the nonpartisan state Legislative Analyst’s Office.

In 2004, voters approved Proposition 71, a $3 billion bond, to be repaid with interest over 30 years. The measure got the state agency up and running and was designed to seed research.

During that first campaign, voters were told research funded by the measure could lead to cures for cancer, Alzheimer’s and other devastating diseases, and that the state could reap millions in royalties from new treatments.

Yet most of those ambitions remain unfulfilled.

“I think the initial promises were a little optimistic,” said Kevin McCormack, CIRM’s senior director of public communications, about how quickly research would yield cures. “You can’t rush this kind of work.”

So advocates are back after 16 years for more research money, and to increase the size of the state agency.

Stem cells hold great potential for medicine because of their ability to develop into different types of cells in the body, and to repair and renew tissue.

When the first bond measure was adopted in 2004, the George W. Bush administration refused to fund stem cell research at the national level because of opposition to the use of one kind of stem cell: human embryonic stem cells. They derive from fertilized eggs, which has made them controversial among politicians who oppose abortion.

Federal funding resumed in 2009, and thus far this year the National Institutes of Health has spent about $321 million on human embryonic stem cell research.

But advocates for Proposition 14 say the ability to do that research is still tenuous. In September, Republican lawmakers sent a letter to President Donald Trump urging him to cut off those funds once again.

The funding from California’s original bond measure was used to create the new state institute and fund grants to conduct research at California hospitals and universities for diseases such as blood cancer and kidney failure. The money has paid for 90 clinical trials.

A 2019 report from the University of Southern California concluded the center has contributed about $10.7 billion to the California economy, which includes hiring, construction and attracting more research dollars to the state. CIRM funds more than 56,500 jobs, more than half of which are considered high-paying.

Despite the campaign promises, just two treatments developed with some help from CIRM have been approved by the Food and Drug Administration in the past 13 years, one for leukemia and one for scarring of the bone marrow.

But it’s a bit of a stretch for the institute to take credit for these drugs, said Jeff Sheehy, a CIRM board member who does not support the new bond measure. He said the agency funded the researcher whose lab discovered and developed the drugs, but CIRM holds no rights to those drugs and doesn’t receive royalties from them.

The state has received about $518,000 in revenue from licensing other institute-funded discoveries, such as devices, McCormack said.

McCormack also pointed to some promising stem cell therapies still in clinical trials, such as a treatment that has cured 50 children of severe combined immunodeficiency, a genetic disorder often called “bubble baby” disease, and others that have led to “dramatic” improvements in paralysis and blindness, he said.

The campaigns for both bond measures may be giving people unrealistic expectations and false hope, said Marcy Darnovsky, executive director of the Center for Genetics and Society. “It undermines people’s trust in science,” Darnovsky said. “No one can promise cures, and nobody should.”

Robert Klein, a real estate developer who wrote both ballot measures, disagrees. He was inspired to invest in stem cell research after he lost his youngest son to Type 1 diabetes. He said some of CIRM’s breakthroughs are helping patients right now.

“What are you going to do if this doesn’t pass? Tell those people we’re sorry, but we’re not going to do this?” Klein said. “The thought of other children needlessly dying is unbearable.”

Sheehy, who has served on the agency’s board for 16 years, said he’s proud of the work the institute has done but believes it should be funded through the legislature, not by borrowing more money.

“The promise was that it would pay for itself and it hasn’t,” Sheehy said. “We can’t really afford it, and this is the worst way to pay for it.”

Even if CIRM isn’t turning a profit, some researchers and private companies are benefiting from the public money. Take the company Forty Seven Inc., named after a human protein and co-founded by Irving Weissman, director of Stanford University’s stem cell research program. The state stem cell agency awarded more than $15 million to Forty Seven, and $30 million to Weissman at Stanford for research.

That money fueled research that uncovered a promising treatment for several different cancers. Gilead Sciences, the pharmaceutical giant, bought Forty Seven in 2018 for $4.9 billion. Of that, $21.2 million went back to CIRM to pay back Forty Seven’s research grants, with interest.

“Gilead will make far more than that if it turns out to be lucrative,” said Ameet Sarpatwari, a professor of medicine at Harvard Medical School who studies drug development.

Because this kind of work is both expensive and risky, private companies are reluctant to pay for early research, when scientists have no idea if their work will yield results, let alone profits, Sarpatwari said. So the state pays for this work, and drug companies come in to finance later-stage research once a molecule looks promising — and ultimately reap the profits.

Case in point: Fedratinib, one of the two FDA-approved drugs funded partly by CIRM, can cost about $20,000 for 120 capsules, according to GoodRx.

“We’re socializing the risk of drug development and privatizing the gains,” Sarpatwari said.

On paper, the institute has stricter pricing regulations than the NIH, which does not require that drugs developed with public money are accessible to the public. In California, companies have to submit plans for how uninsured patients will get medicine and are required to sell those medications to the state’s public health programs at a specified rate.

But in practice, the regulations have never really been tested.

Proposition 14 would add a new rule. It would take the money California makes from royalties and use it to help patients afford those treatments. It also benefits drug companies: Whatever revenue the state makes from these drugs will go back to the companies in the form of state-financed patient subsidies.

The measure also would establish a new working group (complete with 15 new, full-time staffers) that would help make clinical trials more affordable for patients by paying for lodging and transportation to the trials.

And it would increase the size of CIRM’s governing board from 29 to 35. This contradicts recommendations from the Institute of Medicine, which suggested shrinking the board to avoid conflicts of interest. Klein argues the extra board positions are necessary to represent different regions and areas of expertise.

Ultimately, California voters must weigh the possibility of new treatments against the cost of financing them with debt.

“We want to develop new therapies, and initiatives like what California is doing are well positioned to do that,” Sarpatwari said. “But at the end of the day, they’re only as good as people being able to access them affordably.”



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

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.

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This story can be republished for free (details).