Wall Street Journal Examines How Federal Government Use Of Contract Workers Contributes To Number Of Uninsured U.S. Residents

Main Category: Health Insurance / Medical Insurance
Also Included In: Public Health
Article Date: 26 Mar 2008 - 6:00 PDT

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The use of contract workers by the federal government is "quietly" contributing to the number of uninsured U.S. residents because some of the contractors do not offer employee health benefits, the Wall Street Journal reports. Under federal law, contractors with service contracts of more than $2,500 are required to provide locally prevailing wages as well as fringe benefits or the cash equivalent. The cash equivalent for benefits this year is $3.16 per hour, which totals $5,587 per year for a full-time worker in a 15% tax bracket, according to Department of Labor calculations. Contractors do not have to comply with the law if they are in an industry that typically does not offer health insurance.

According to the Journal, "Outsourcing of federal government jobs reflects the same cost-cutting imperatives that drive private businesses to outsource." Paul Light, a political scientist at New York University's Wagner School of Public Service and specialist on government employees, said that from 1990 to 2005, the number of federal contract employees doubled to 5.4 million. Light said that about 80% of contract workers are lower-wage workers who are less likely to be offered health insurance or purchase it on their own. Some workers use the extra money for rent, food and other expenses, rather than health coverage. In addition, some contract workers who are paid the cash equivalent cannot obtain health coverage because they have pre-existing health conditions, and private market coverage is usually more costly than the subsidized plan offered to regular government workers.

According to Al Corvigno, a consultant who trains contractors and DOL employees on the service-contract law, about 40% of service contractors might not be providing required benefits or paying the cash equivalent. Lawyers and consultants who work in the field say that some contractors do not comply with the service-contract law because they do not understand it or they do not think they will get caught, the Journal reports.

Under the law, contract employees cannot sue their employers over alleged violations, but they can file a complaint with the DOL. The department last year conducted more than 650 investigations, of which about 80% revealed that the contractor was not providing proper wages or benefits. However, Alex Passantino, acting administrator at the DOL's Wage and Hour Division, said the department has not heard about growing concerns about violations of the service-contract law (Zhang, Wall Street Journal, 3/25).

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