Proposition 22, passed in November 2020, allows for certain drivers of mobile application network companies, such as Uber and Lyft, to receive a stipend from the company for health insurance premiums. Covered California is tasked with determining the benchmark health insurance premium upon which the quarterly stipend is based and providing a quarterly statement to the drivers as proof of enrollment in a health plan.
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App-Based Driver Health Insurance Stipend
Individuals who work as contractors for a company and receive a 1099 income statement are not eligible for the company’s employer sponsored group health plan. Proposition 22 allows app-based network companies to pay their 1099 contracted drivers a stipend amount on a quarterly basis to help with the costs of health insurance. As of February 2021, some of the app-based network companies that may participate in the health insurance stipend programs are:
- Amazon Flex
- Lyft Postmates
- Uber Eats
To be eligible for the health insurance stipend, drivers must work a minimum of 15 hours per week. However, in order to receive the full stipend amount, a driver will need to log 25 or more engaged hours per week during a calendar quarter.
The stipend will be based on the average statewide monthly premium for an individual Covered California Bronze plan. Covered California has determined the average monthly Bronze plan for 2021 to be $499 per month. The Bronze plan average is calculated by taking rate for a 21-year-old individual for the purposes of determining the California Shared Responsibility Penalty, and then multiplying the rate to weight it upwards for age. The age weighted factor is 1.715 times $291, for an average monthly Bronze plan premium of $499 for 2021. The average rate will be updated every year by Covered California.
Quarterly Stipend Based On Weekly Drive Hours
Under Proposition 22, a driver will be eligible for either 41 or 82 percent of the monthly average Bronze premium as a stipend.
- Drivers who averages 25 or more engaged hours per week during a calendar quarter could receive the full stipend of 82 percent or $409 per month (0.82 x $499.)
- Drivers who average at least 15 hours, but fewer than 25 hours, of engaged work per week during the calendar quarter could receive half of the full stipend or 41 percent: $205 per month.
Drivers will need to supply proof of health insurance. The health insurance can be a health plan purchased through Covered California or off-exchange directly from the carrier according to Covered California. Important to note is that Medicare, Medi-Cal, employer sponsored group plans, and Minimum Coverage plans (for individuals under 30 years old) are not qualifying health insurance for the purposes of the stipend. Drivers should always consult the app-based network for health plans eligible for the stipend.
Covered California will provide quarterly statements to individuals to be submitted as proof of health insurance to the app-based company. The companies may also accept other forms of health insurance enrollment such as member ID cards. The Covered California statements will indicate the months that the individual was enrolled in a health plan for the quarter.
The health insurance stipend does not interfere with any federal or California premium assistance subsidies the driver may be entitled to through enrollment in Covered California. The stipend functions as reimbursement for health insurance on a quarterly basis. The drivers are not required to use it to pay their health insurance premiums.
I have no information on whether the stipend will be considered as taxable income. However, Covered California states that the stipend will be counted as income relative to the Modified Adjusted Gross Income used for determining any health insurance subsidy through Covered California. Consequently, a driver receiving the stipend should amend their income estimate to reflect the additional income amount. Federal and California premium assistance subsidies are not considered income. Some drivers, being self-employed, may be able to deduct their health insurance premiums from their taxable income.
Covered California Special Enrollment Period
Covered California will create a special enrollment category for app-based drivers. The qualifying life event for the Special Enrollment Period will be “Newly qualifies for app-based driver stipend.” Both new and existing drivers will qualify for the Special Enrollment Period, even if they are already enrolled a Covered California health plan.
- A new driver who begins working for an app-based network company may use this qualifying life event (QLE), including drivers who may drive for a different app-based network company. New app-based driver enrollees using this QLE will receive coverage effective the first of the month following plan selection. Remember, new app-based driver enrollees will need to pay their first premium to effectuate their coverage, and they must pay the subsequent monthly premiums themselves.
- An existing driver may use this QLE if they attest that at the end of the calendar quarter, they newly expect to qualify to receive the stipend.
- A driver who already has a Covered California plan may use the QLE to change their plan to a different metal tier or product. A plan change may cause to loss of out-of-pocket costs that had been accrued toward meeting any deductible or maximum out-of-pocket amounts. A plan change may necessitate making a new binder payment to effectuate the plan.