Category Archives: Insurance

Surfing the Data Tsunami

You can either ride the wave...

You can either ride the wave…

by James A. Bacon

Data Crush is coming, and it gives us a once-in-a-lifetime opportunity to transform aging and decrepit institutions, designed for the mid-20th century. As futurist Chris Surdak argues in the previous post, the “digital trinity” — mobile computing, social media and advanced analytics — is sweeping all before it. Digital-driven innovation is outpacing the ability of our ossified structure of government, laws and regulation to keep up. Insofar as antiquated institutions are failing us, this is a good thing. But Surdak, an evangelist for the digital future, warns that every silver cloud has a dark lining.

Either you're riding the wave, or you're crushed by it.

…or be crushed by it.

Insurance companies have the capacity to collect, store and analyze unprecedented volumes of data. At present, they utilize their own data to advance limited aims such as negotiating rates with hospitals and configuring networks of low-cost providers. Soon they will supplement internal data with social media and other sources to gain insights into sociological and behaviorial  dimensions of healthcare, and then with masses of data from fitness trackers such as FitBit and Jawbone that record pulse, blood pressure, and blood chemistry metrics like glucose levels. While these technologies raise privacy concerns aplenty, consumers seem more than willing to barter away their rights in exchange for the benefits provided by these technologies. By the time politicians and lobbyists begin to grapple with these issues, Surdak argues, entire industries will be disintermediated and transformed.

Virginia can either ride the wave or let it wash over us. We can either anticipate the data crush and seek to guide it in socially positive ways, or we can accept whatever comes.

Right now Virginia’s political system is locked in a 20th-century, zero-sum debate over how to allocate the costs of health care — should Virginia expand Medicaid? Should we scrap the Certificate of Public Need regulatory process for hospitals? Almost no one is thinking about how to make the system work more efficiently to drive down costs and improve incomes in a way that would benefit everyone. (When I say “almost no one,” I have to acknowledge exceptions like Del. John O’Bannon, R-Henrico, a prime mover behind Virginia’s all-payer database, and former Virginia Secretary of Technology Aneesh Chopra, co-founder of Hunch Analytics, which applies Big Data to the educational and health care sectors.)

To my knowledge, no other state is taking the lead in thinking about the public policy implications of the Data Crush. No other state is trying to visualize the future, much less to grapple with the legal and ethical issues created by the tidal wave, much less how to ride the wave and re-shape first the insurance industry and then, leveraging the power of insurance, the health delivery system. Remember, despite the intrusion of the Affordable Care Act into the health insurance marketplace, private health insurance is still regulated by the states. Virginia still controls its destiny for private insurance.

Yes, the health care system is mired in the quicksand of subsidies, cross-subsidies and over-regulation that makes it hopelessly wasteful and unresponsive. But the Data Crush is inexorable. The potential exists to create powerful win-win-win social outcomes. Let us take advantage of this opportunity if we can.

How the Digital Trinity is Transforming Health Insurance

surdakby Christopher Surdak, JD

In his recent post, “The Politics of Big Data,” my friend and colleague Jim Bacon asked some pertinent questions regarding how our government, and our society at-large, can put data to use for the common good. In a fairly short discourse Jim hit on a range of explosive topics, from privacy, data sovereignty, property rights, Universal Service, government regulation and legislation, universal health care, Obamacare and Medicare/Medicaid, predictive analytics and preventative medicine, and more. Each of these could fill a book in their own right; I should know, as I’m working on those books right now!

Of all of the issues raised by this discussion, the one that immediately came to mind was that of the use of our individual data to support the effective delivery of healthcare. As I have written and spoken of extensively in the recent past, healthcare stands to be the industry most disrupted by the application of Big Data in the coming decade. (Indeed, I’m keynoting a discussion on exactly this disruption at the American Health Information Management Association information governance conference this week.) In no other industry is so much valuable information put to so little use, for so little gain, at so much cost, thereby leading to suffering, the waste of human life, and the ineffective expenditure of so much treasure.

Why is this so? Why is our health system so sickly when compared to that of other countries? Why does healthcare seem to extract so little value from information, when compared to other industries? Is it from too much government regulation, or too little? Is it from the influence of commercial special interests such as the payers, or the professional special interests of practitioners, such as the AMA? Is it because our technologies cannot meet our needs, or is it because we are not prepared to accept the implications of those technologies? I would argue that all of these factors are at play in this discussion; that all of the ranting that accompanied Jim’s post were all equally spot on, and all completely off the mark.

All of these positions are equally accurate, and equally pointless in the real world. Whether healthcare providers put patient data to work for the common good or their own good is irrelevant; it will be put to work in any event, with significant unintended and extremely disruptive consequences. Whether special interests or patients will benefit from the use of data is not open to question. The answer is: both will. Whether or not our privacy will be sacrificed or not is also a pointless question; of course it will. And finally, whether or not we will willingly give up our privacy in order to gain these benefits from our data is a further pointless question; we already have.

Disruption in Insurance: The Canary in the Coal Mine for Healthcare

The best example I can give of what WILL happen in healthcare over the next decade, equally in Virginia as with the other 49 states, can be seen in what is rapidly taking over the insurance industry across the country. Insurance is an old-school, highly-regulated, data- and money-intensive industry. Insurers have both access to massive amounts of very private information on all of us, and intense motivation for putting that data to use. The potential for profit, and hence abuse, is exceedingly large.

But, the motivation for using our data isn’t necessarily nefarious. Insurers look at each of us to determine our risk profiles so that they can both make money (that is, remain solvent so their checks to benefactors or debt holders don’t bounce) and provide coverage to all segments of the population at affordable prices (or at least the perception of affordability).

The regulatory framework that governs the insurance industry is well over a century old. It is state-based, state-enforced, and is designed to provide universal coverage to people from all walks of life. If you drive a twenty-year-old pickup truck, you probably pay proportionately less than someone who drives a new European sports sedan. If you’re a 60-year-old who smokes a pack a day and loves Miller Time, you’re likely to pay more for your life insurance than a 24-year-old jogger and yoga nut. Our regulatory framework has been designed to try to make insurance available and fair for all, and to ensure that insurers remain profitable, but not excessively-so.

Despite all of this, insurance is going through a fundamental, massively disruptive, and permanent transformation right before our eyes. This transformation is being driven by what I call the Digital Trinity of mobility, social media and advanced analytics. These three technologies trends are completely transforming how we live, work, play, and interact with our world, and they are causing enormous unintended consequences across our entire society. These changes are comprehensive, and old-school, hard-line, heavily regulated industries such as insurance are the MOST likely to be disrupted, rather than the least likely.

To see these disruptions consider this. Car insurers have deployed smartphone apps that allow them to track the driving behaviors of their customers in real-time, turn by turn. These apps keep track of how fast you accelerate, how hard you brake, how fast you drive down the residential streets of your neighborhood, and whether or not you text or talk while driving. These apps create huge amounts of extremely sensitive data, they are massively invasive of your privacy, they provide an enormous source of information for discriminating against you in setting your insurance rates; and they are massively popular.

If I told you three years ago that car insurance companies soon would be tracking all of this information on the drivers that they cover, you might think I was crazy. If I then told you that customers would sign up for such apps by the tens or hundreds of thousands, in order to gain a discount in their rates, you’d probably think I was certifiable. Americans are voluntarily giving up extremely intimate details on their behavior, surrendering their Constitutionally inalienable rights, and opening themselves up to all manner of government and commercial scrutiny in order to save 15% on their car insurance? Yes they are, in droves. You may think this sounds crazy, and you’d be right.

Yet, this is exactly what is going on right now. Innovators such as Progressive Insurance started these behavior-tracking apps, providing discounts to drivers who demonstrate good behaviors. These apps have been so successful, that now all insurers are scrambling to deploy similar apps with similar capabilities, while they still have time. Continue reading

The Politics of Big Data

big_databy James A. Bacon

Yesterday I blogged about the All-Payer Claims Database, which has the potential to provide unprecedented insight into medical outcomes and charges in Virginia. By consolidating medical claims data for hundreds of millions of health claims, the database will enable employers, insurers and hospitals to conduct analytical studies that were impossible previously.

There is a lot of maneuvering behind the scenes regarding the database, as I have learned from an informed source whom I will not quote because we were chatting informally and he might have thought we were off the record.

Participation in the database is voluntary, so it took years of coaxing and wrangling to persuade Virginia’s private insurance companies to relinquish their data. Anthem Blue Cross-Blue Shield, the state’s largest insurer, is the most ambivalent about the project. With more than one million Virginia customers, its database is big enough that it can go solo with the kind of analysis people envision for the statewide database. That ability confers it a significant competitive advantage over its smaller rivals. If Anthem dropped out, the value of the statewide database would diminish significantly. Accordingly, the General Assembly may consider legislation in 2016 to make participation mandatory.

That raises an interesting philosophical question: Is it justifiable for state government to mandate the sharing of outcomes data? In an era in which data confers tremendous marketplace power, any such mandate would penalize Anthem. The insurer could advance a plausible argument that a requisitioning of its data would amount to an uncompensated seizure of valuable property — property far more valuable than its office buildings, computer networks and other tangible assets.

But Anthem’s right to protect its property from government seizure conflicts with the public good that can be achieved through the sharing of data. The bigger and more comprehensive the database, the greater the benefits to public health that can be achieved by mining it.

Politicians comfortable with the exercise of state power will have no moral or philosophical compunction about extracting the data from Anthem against its wishes. But what of conservatives and libertarians who respect private property and distrust the arbitrary exercise of government power? Should we insist that any sharing be voluntary? Or should we compel Anthem to share?

I think there is a case to be made for mandated data sharing on conservative/ libertarian grounds that it can drive market-based reforms of Virginia’s health system. Health care in America is not a market-based system, it is a corporatist system negotiated between the federal government, hospitals, insurers, physicians and pharmaceutical companies. Prices are opaque to the patient-consumer. Accountability is so diffused throughout the system as to be meaningless. Making price and quality data available to the public, formatted in such a way that the public can understand it and act upon it, is essential to creating a market-based system.

But price and quality data are only part of the picture. Virginia has other state-level barriers to a market-based system, including the Certificate of Public Need (COPN), which restricts competition, and state-imposed insurance mandates, which force insurers to offer expensive plans with broad benefits. Price transparency cannot by itself drive the transformation to a competitive, market-based system. But as part of a bundle of reforms including the repeal of COPN and insurance mandates, data sharing could bring about a net gain in freedom, competitiveness and prosperity that would appeal to the conservative conscience.

Alpha Natural Resources: Running Wrong

Alpha miners in Southwest Virginia (Photo by Scott Elmquist)

Alpha miners in Southwest Virginia
(Photo by Scott Elmquist)

 By Peter Galuszka

Four years ago, coal titan Alpha Natural Resources, one of Virginia’s biggest political donors, was riding high.

It was spending $7.1 billion to buy Massey Energy, a renegade coal firm based in Richmond that had compiled an extraordinary record for safety and environmental violations and fines. Its management practices culminated in a huge mine blast on April 5, 2010 that killed 29 miners in West Virginia, according to three investigations.

Bristol-based Alpha, founded in 2002, had coveted Massey’s rich troves of metallurgical and steam coal as the industry was undergoing a boom phase. It would get about 1,400 Massey workers to add to its workforce of 6,600 but would have to retrain them in safety procedures through Alpha’s “Running Right” program.

Now, four years later, Alpha is in a fight for its life. Its stock – trading at a paltry 55 cents per share — has been delisted by the New York Stock Exchange. After months of layoffs, the firm is preparing for a bankruptcy filing. It is negotiating with its loan holders and senior bondholders to help restructure its debt.

Alpha is the victim of a severe downturn in the coal industry as cheap natural gas from hydraulic fracturing drilling has flooded the market and become a favorite of electric utilities. Alpha had banked on Masset’s huge reserves of met coal to sustain it, but global economic strife, especially in China, has dramatically cut demand for steel. Some claim there is a “War on Coal” in the form of tough new regulations, although others claim the real reason is that coal can’t face competition from other fuel sources.

Alpha’s big fall has big implications for Virginia in several arenas:

(1) Alpha is one of the largest political donors in the state, favoring Republicans. In recent years, it has spent $2,256,617 on GOP politicians and PACS, notably on such influential politicians and Jerry Kilgore and Tommy Norment, according to the Virginia Public Access Project. It also has spent $626,558 on Democrats.

In 2014-2015, it was the ninth largest donor in the state. Dominion was ahead among corporations, but Alpha beat out such top drawer bankrollers as Altria, Comcast and Verizon. The question now is whether a bankruptcy trustee will allow Alpha to continue its funding efforts.

(2) How will Alpha handle its pension and other benefits for its workers? If it goes bankrupt, it will be in the same company as Patriot Coal which is in bankruptcy for the second time in the past several years. Patriot was spun off by Peabody, the nation’s largest coal producer, which wanted to get out of the troubled Central Appalachian market to concentrate on more profitable coalfields in Wyoming’s Powder River Basin and the Midwest.

Critics say that Patriot was a shell firm set up by Peabody so it could skip out of paying health, pension and other benefits to the retired workers it used to employ. The United Mine Workers of America has criticized a Patriot plan to pay its top five executives $6.4 million as it reorganizes its finances.

(3) Coal firms that have large surface mines, as Alpha does, may not be able to meet the financial requirements to clean up the pits as required by law. Alpha has used mountaintop removal practices in the Appalachians in which hundreds of feet of mountains are ripped apart by explosives and huge drag lines to get at coal. They also have mines in Wyoming that also involve removing millions of tons of overburden.

Like many coal firms, Alpha has used “self-bonding” practices to guarantee mine reclamation. In this, the companies use their finances as insurance that they will clean up. If not, they must post cash. Wyoming has given Alpha until Aug. 24 to prove it has $411 million for reclamation.

(4) The health problems of coalfield residents continue unabated. According to a Newsweek report, Kentucky has more cancer rates than any other state. Tobacco smoking as a lot to do with it, but so does exposure to carcinogenic compounds that are released into the environment by mountaintop removal. This also affects people living in Virginia and West Virginia. In 2014, Alpha was fined $27.5 million by federal regulators for illegal discharges of toxic materials into hundreds of streams. It also must pay $200 million to clean up the streams.

The trials of coal companies mean bad news for Virginia and its sister states whose residents living near shut-down mines will still be at risk from them. As more go bust or bankrupt, the bill for their destructive practices will have to borne by someone else.

After digging out the Appalachians for about 150 years, the coal firms have never left coalfield residents well off. Despite its coal riches, Kentucky ranks 45th in the country for wealth. King Coal could have helped alleviate that earlier, but is in a much more difficult position to do much now. Everyday folks with be the ones paying for their legacy.

Capitalism Triumphs Again!

RAM clinic, Pikesville Ky., June 2011. Photo by Scott Elmquist

RAM clinic, Pikesville Ky., June 2011.
Photo by Scott Elmquist

By Peter Galuszka

If there were any questions about just how capitalism has failed, one need look no farther than Wise County, where, this week, hundreds, if not thousands, of people will line up for free medical care.

The event is ably noted in The Washington Post this Sunday by a young opinion writer named Matt Skeens who lives in Coeburn in the coalfields of southwestern Virginia.

This week, the Remote Area Medical clinic will come to the Wise County fairgrounds to offer free medical and dental care to anyone who needs it.

You might ask yourself a question: why do so many people in one of the parts of the United States that is fantastically wealthy with natural resources need free medical care? Where is the magic of capitalism so often lauded on this blog?

A few insights from Mr. Skeens:

“Local representatives of Southwest Virginia will travel to the fairgrounds to stand on a coal bucket and assure us they’re fighting against President Obama and the ‘war on coal.’ These politicians won’t mention that with their votes to block Medicaid expansion, they ensured that the lines at RAM won’t be getting any shorter. But hating Obama in these parts is good politickin.”

Skeens runs through a list of mountain folk who can’t afford health care. One is a breast cancer survivor who hasn’t had a screenings in years. His grandfather, a retired electrician and coal miner, had also camped out at RAM clinics to get help.

Odd that this is the way I found neighboring West Virginia when I moved there with my family from suburban Washington, D.C. in 1962. Just as it was then, the riches that should have helped pay for local medical care went out of state. Much of the coal left by railcar or barge. Now, natural gas released by hydraulic fracking will find its way to fast-growing Southeastern cities or perhaps overseas thanks to new proposed pipelines such as a $5 billion project pitched in part by Dominion Resources.

While I have never been to the Wise County RAM clinic, I did happen to drop by one in Pikesville, Ky., a coalfield area that is one is Kentucky’s poorest county. It is not far from Wise. I was busy researching a book on Richmond-based Massey Energy, a renegade coal firm, in June 2011.

Photographer Scott Elmquist and I were on our way from Kentucky to an anti-strip mining rally in West Virginia when we noticed the RAM signs. More than 1,000 people had started lining up at the doors around 1:30 a.m. at the local high school.

It was packed inside. A Louisville dental school had sent more than 50 dental chairs that lined the basketball court. Some of the patients said they were caught in a bind: they had jobs but didn’t have enough health coverage and couldn’t pay for what they needed.

Since then, there’s been some good news. Unlike Virginia, whose legislature has stubbornly refused to expand Medicaid to 400,000 residents who need it (supposedly in a move to tighten federal spending), Kentucky expanded Medicaid last year. Now, 375,000 more people have health insurance.

Not so in Virginia. People continue to suffer while those with comfortable lives laud the miraculous benefits of capitalism.

A Landmark Day for the Rule of Law

Chief Justice John G. Roberts: "It depends on what the meaning of 'state' is."

Chief Justice John G. Roberts: “It depends on what the meaning of ‘state’ is.”

The United States Supreme Court has ruled that wording in the Affordable Care Act — that subsidies should be limited to health care exchanges “established by the State” — did not mean what it plainly said and that Congress “meant” for subsidies to be made available to federally established exchanges as well.

In a series of other dramatic rulings, the Supreme Supreme also ruled that the sky is green, one plus one equals three and the laws of physics are subject to judicial interpretation.


Only Marginal Gains from Obamacare Insurance Overhaul


Percentage of adults 18-64 who lacked health insurance coverage, 1997-2004. Graphic credit: National Health Interview Survey

by James A. Bacon

After all the strum and drang over Obamacare, the restructuring of the United States health care system, the re-engineering of the medical insurance industry and dislocation to millions of Americans who discovered they could not necessarily keep their doctor or their health care plan, even if they liked it, it turns out that the piece of the program that made the biggest difference in increasing health coverage for the American people was Medicaid expansion. Take that away, and the number of Americans lacking health care coverage declined only slightly — and the reasons for that decline are not clear.

That’s not the spin put on the numbers you’ll read in the media. (See the Richmond Times-Dispatch spin here.) But it’s certainly a legitimate interpretation of the numbers reported by the 2014 National Health Interview Survey, which is not a libertarian think tank or funded by the evil Koch Brothers but a program of the National Center for Health Statistics.

The number of Americans under 65 years old covered by the infamous health care exchanges amounted to 6.7 million — or about 2.5% of that segment of the population. (Remember, that number includes Americans who previously had private insurance and found themselves bumped into an exchange.) That compares to 170 million, or 63.6%, who were covered by private health insurance plans, and 36 million (11.5%) of Americans without any kind of insurance, public or private.

A major driver behind the improved numbers was expansion of Medicaid. Among working-age adults in states that expanded Medicaid, states the report, the percentage with Medicaid coverage expanded from 17.7% in 2013 to 19.9% in 2014 — a gain of 2.2 percentage points, while comparable adults in states that did not expand Medicaid, like Virginia, saw no significant change in public coverage. Literally half the gains in the insurance-coverage rate could have been achieved by expanded Medicaid (in the states that chose to expand it) and scrapping the rest of Obamacare.

Here are the Virginia numbers for all ages:

Private health coverage — 67.0%
Public health coverage — 31.3%
Uninsured — 10.8%

Lost in the weeds is the bigger picture. Look at the chart of uninsured Americans at the top of the page. While the number of uninsured  dropped significantly between 2013 and 2014, the uninsured population had been shrinking since 2010 at the worst of the Great Recession. Significant gains in insurance coverage occurred simply as the result of increasing employment.

Now compare the 2014 numbers to the 1999 numbers — the number of uninsured is about the same. Anyone remember 1999? That was the tail end of the Clinton-era Internet boom. Unemployment was exceedingly low. The best way to ensure that Americans enjoy health care insurance is to ensure that they have a job. Not every job provides medical coverage but most do. The more employers find themselves competing for labor, the more likely they are to provide some level of medical insurance.

Instead of pursuing macro-economic reforms and institutional reforms that bolster productivity and sustainable economic growth, the United States got a one-shot stimulus plan, higher taxes, more regulation, Obamacare and sub-par economic growth. While Americans have made marginal gains in gaining access to health insurance, thanks to Obamacare, we’re also experiencing a consolidation of the hospital industry into a handful of cartel-like “health systems,” the conversion of physicians from independent providers into salaried minions of hospitals, and a consolidation of the health insurance industry. The health care industry is becoming stodgier, more bureaucratic, more risk averse, more prone to rent-seeking and less interested in innovation. For marginal gains in the percentage of the insured population, we will all be losers in the long run.

Dubious Oil Lobby Bankrolls Dubious Poll

CEABy Peter Galuszka

In a recent post, Bacons Rebellion extolled the findings of Hickman Analytics Inc., a suburban Washington consulting firm hired by the Consumer Energy Alliance, which found that according to a survey of 500 registered voters, the vast majority of Virginians support Dominion’s Atlantic Coast Pipeline.

The $5 billion project would take natural gas released by hydraulic fracturing from West Virginia southeastward through Virginia into North Carolina. Dominion has taken some strong-arm tactics to force the project through, such as suing property owners who declined to let surveyors onto their property.

Having reported on the controversy in such places as Nelson County, I was surprised to note the Hickman results showing such a strong support for the pipeline.

Maybe, I shouldn’t have been so surprised.

Let’s start with the so-called “Consumer Energy Alliance.” For starters, it is a Texas based lobbying group funded by such fossil fuel giants as ExxonMobil and Devon Energy, perhaps the largest independent oil rim in the country plus as host of utilities.

It has been traversing the United States drumming up support, often through dubious polls, against initiatives to cut back on carbon emissions. It supports the Keystone XL and other petroleum pipelines.

Says SourceWatch, quoting, “The CEA is part of a sophisticated public affairs strategy designed to manipulate the U.S. political system by deluging the media with messaging favorable to the tar-sands industry; to persuade key state and federal legislators to act in the extractive industries’ favor; and to defeat any attempt to regulate the carbon emissions emanating from gasoline and diesel used by U.S. vehicles.”

The group was created in the late 2000s by Michael Whatley a Republican energy lobbyist with links to the Canadian and American oil sector.

The alliance’s modus operandi is to use “polls” presumably of average voters on key energy issues.

In Wisconsin, the CEA got involved in a battle over an attempt by electric utilities to hike rates if individual homeowners used solar panels to generate power. The state is dominated by coal-fired power and hasn’t done much with renewables. The utilities claim that they paid for the electricity grid and therefore home-power generators must pay extra for its use and the cost should be shared by all through rate hikes.

Many ratepayers opposed this blatant attempt to push back at solar power. Then, all the way from Texas and Washington, the Consumer Energy Alliance jumped in with the names of 2,500 local ratepayers who backed the rate hikes. It wanted to give their names to Wisconsin regulators.

The Grist asked: “What dog does CEA, a trade group from Texas, have in Wisconsin’s fight, anyway? Well, CEA represents the interests of mostly fossil fuel companies, so it is engaged in a nationwide campaign to slow the spread of home-produced renewable energy. It has a regional Midwest chapter, which pushes for fracking and for President Obama to approve the Keystone XL tar-sands pipeline.”

I was likewise puzzled by the Virginia pipeline survey that CEA paid for by Hickman Analytics, a Chevy Chase, Md. firm that does a lot of political polling. The firm is powerful and its principals were heavily involved with disgraced Democratic presidential candidate John Edwards.

There was a poll by Hickman for CEA showing that New Hampshire vote just love Arctic offshore drilling. That’s off because the Granite State isn’t anywhere close to the Arctic despite its cold winters.

There was another Hickman/CEA poll showing how much Coloradans love the Keystone XL pipeline – another curiosity because the last time I checked that pipeline doesn’t run through Colorado.

And, fresh with a “five figure” sponsorship from Dominion, Bacon’s Rebellion publisher James A. Bacon Jr. starts writing about this dubious poll from a dubious source showing that Virginians are tickled pink with the ACL pipeline. When questioned, he says it’s nothing different from a poll funded by the Sierra Club.

Maybe, on another matter, it is curious that Bacon’s Rebellion’s sponsorship deal with Dominion which Jim posted online is signed by Daniel A. Weekley, vice president for Dominion corporate affairs.

The very same Mr. Weekley signed an informational packet sent out to Virginia homeowners impacted by the proposed pipeline route telling them what a great thing the pipeline is.

Am I connecting the dots correctly?

Does the Gig Economy Need Fixing?

warnerby James A. Bacon

Senator Mark Warner, D-Virginia, has latched onto a fascinating issue: the “disaggregation of the workplace.” That’s wonk talk for the Uber-ization of the United States economy, in which an increasing percentage of the population engages in contingency work outside the highly regulated setting of full-time employment. Warner rightly calls this trend “the most radical transformation of the American workplace in the past 30 years,” and he thinks that people in Washington need to start talking about it.

Warner’s right about one thing: The rise of the contingency workforce is indeed rewriting the social contract between employer and employee. But I’m not so sure it’s a good idea for the politicians to get involved. I’d like to see evidence that contingency employment is broken before Congress tries to fix it.

In the gig economy, also called the sharing economy, workers engage in a contractual relationship with customers to provide services — the conveyance of passengers in Uber cars, or completion of a writing contract, or fulfillment of an IT task. The advantage is an unprecedented degree of flexibility. Workers are free to take on as much work as they can find, or as little as they want. They are more geographically mobile, not tied to one particular location. They can set their own hours. They can pick and choose whom they want to work with, and if they don’t like a relationship, they are free to leave it.

The downside is that there are no government-mandated employment benefits or protections. Free-lancers don’t get company-provided pensions or health-care benefits. They don’t get unemployment benefits, worker’s compensation or disability. “If there is no safety net,” says Warner in the USA Today interview seen here, “someone can hit a rough patch and have no alternative but to fall back on government assistance programs.”

Warner does not necessarily advocate extending the old workforce model to the contingency workforce. He wants to start thinking about how to improve the new model. Washington, he says, needs to look at things like hour banks (a currency exchange in which the unit of exchange is a person-hour of time) or opt-ins (I’m not sure what he’s referring to) or models emerging in Europe.

Contigency workers already have the option to purchase health and disability insurance on the open market, and they have the option to put money into IRAs. It’s not always easy finding the money to divert to those self-insurance programs, however, so not everyone chooses to take advantage of them. Paternalists no doubt fret that current arrangements that leave “too much” discretion to workers and that bad decisions might result in people relying upon the federal safety net.

As a contingency worker myself, living off Bacon’s Rebellion sponsorships and free-lance work, I value the freedom I have to work at home, meet with a driveway paving contractor (as I did today), pick up my kid from school (as I will do later), zip over to the neighborhood pool to swim a few laps (which I’ll do if I have enough time), and prepare dinner for when my wife gets home from her 8-to-7 job. If that freedom means working nights and weekends to get the job done, that’s my decision. I like this way of life.

I’m all in favor of expanding peoples’ choices, something that the private sector is particularly adept at doing. I would bitterly oppose legislation in which Congressmen or bureaucrats decide that they know what’s best for me and tell me how I need to allocate my income. Unfortunately, I’ve never known Congress to look at a “problem” and fail to find a “solution.” Right now, I’m not convinced there’s a problem that needs fixing, and, despite Warner’s perspicacity in spotting a new trend, I’m not sure I want Congress monkeying around with it.

Hottest Primary May Be 10th Senate District

 By Peter Galuszka

Emily Francis

Emily Francis

Primaries in Virginia used to be a bore, but no longer.

Last year, Dave Brat’s Tea Party-backed insurgency against the seemingly impregnable Eric Cantor garnered national headlines in the 7th Congressional District.

This year, you have several General Assembly races come June 9 that will seek to replace several prominent politicians who are retiring, including Republicans John Watkins of the 10th Senate District; Walter Stosch of the 12th Senate District; and Democrat Charles Colgan of the 29th.

I picked the 10th District race for a piece in Style Weekly. There, historic tax credit developer Dan Gecker, a long time Chesterfield County planning commissioner and supervisor, is up against progressive non-profit consultant Emily Francis and former delegate and lawyer Alex McMurtrie for the Democrat candidacy. Whoever wins faces Republican nominee Glen Sturtevant and Libertarian Carl Loser.

Dan Gecker

Dan Gecker

The race could well determine whether the state senate remains in Republican hands. Should the Democrat win, the mix in the senate could bounce back to 20-20; it is 21-19 now in favor of the GOP. Stephen Farnsworth, a political analyst at the University of Mary Washington,  told me this is the race to watch.

What’s also curious is that the 10th District is a true anomaly. One might assume that such as district would be comfortably GOP. It isn’t since it stretches from the blue areas of Richmond like the Museum District and the Northside. It covers parts of the more conservative mega-neighborhoods of Brandermill and Woodlake in Chesterfield and then all of Powhatan County.

Instead of having the likes of Brat saying that his opponent isn’t conservative enough, Francis says she’s the only true progressive in the race.

Another quirk is that Gecker, a moderate who says he’s a progressive, figured in the Bill Clinton impeachment.

Back in the 1990s, he was lawyer to Kathleen Willey, a Powhatan resident who claimed that Clinton groped her in the White House. Gecker represented her in a book deal. Some Democrats have said that Gecker is a Clinton-basher – an interesting claim now that part of the Democratic establishment is gearing Hillary Clinton for another presidential run.

Gov. Terry McAuliffe, a Clinton confidante, has tried to smooth things over by endorsing Gecker.