Slight Decline in Contingent Workers, Little Change in Alternative WorkArrangements, 1995 to 1997

Who Is Covered by ERISA for Health Benefits?

July 1998, Vol. 19, No. 7
Paperback, 12 pp.
PDF, 60 kb
Employee Benefit Research Institute, 1998

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Executive Summary

Slight Decline in Contingent Workers, Little Change in Alternative Work
Arrangements, 1995 to 1997
—Between 2.4 million and 5.6 million workers (or between 1.9 percent and 4.4 percent of the
work force) were contingent workers in 1997, according to a survey released by the Bureau
of Labor Statistics (BLS). The data were collected through a supplement to the February
1997 Current Population Survey (CPS). Contingent workers are defined as those individuals
who perceive no "explicit or implicit contract for ongoing employment." This
represents a slight decline in the number of contingent workers since 1995, when
contingent workers represented 2.2 percent to 4.9 percent of the work force.

The contingent worker and alternative work arrangement data did not change dramatically
between February 1995 and 1997. However, there was a small increase in the percentage of
workers in alternative work arrangements with health benefits. The trends will be
interesting to follow as the baby boom generation begins to retire. There has been some
evidence that the meaning of retirement is changing and that retirees often return to work
during retirement. If this is the case, as the boomers retire, some may choose employment
in the contingent work force or choose some form of alternative work arrangement,
especially if unemployment rates remain low and employers provide incentives for retirees
to return to work.

Who Is Covered by ERISA for Health Benefits?—Employers implement a group health plan by using one of two basic arrangements: 1) the
employer either purchases a health insurance policy (or health maintenance organization
(HMO) contract) from an insurance company (or HMO) that assumes the risk of paying for the
claims of the plan's participants, or 2) the employer self-insures (funds) the plan by
paying for the claims of the plan's participants out of its revenue. The first arrangement
is referred to as an insured plan, while the second arrangement is referred to as a
self-insured plan. Plans using either arrangement are regulated at the federal level under
the Employee Retirement Income Security Act of 1974 (ERISA), but the ERISA preemption
structure creates a difference in state regulatory authority between the arrangements. In
general, ERISA preempts all state laws and regulations that "relate to" employee
benefit plans, but it "saves" state regulation of the "business of
insurance." However, it prevents states from "deeming" benefit plans to be
in the "business of insurance" for the purposes of state regulation.