» » Analysis | The Technology 202: Major tech companies could be battered by ACA ruling if it's upheld - The Washington Post

Analysis | The Technology 202: Major tech companies could be battered by ACA ruling if it's upheld - The Washington Post

Readers, it's been quite a year in tech policy news! This week I’ll be writing about the biggest tech policy stories of 2018 and looking forward to what will make news in 2019. Got ideas about what I should include? Drop me a line at cat.zakrzewski@washpost.com or DM me at Cat_Zakrzewski.

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In this June 6, 2018, file photo Uber driver Joshua Oh drives in Honolulu. Uber has created a feature on its app to reach out to passengers and drivers if it detects an accident or unplanned stop. (AP Photo/Caleb Jones)

Many on-demand technology companies that rely on Obamacare to provide health care for their workers could ultimately be battered by Friday's decision by a federal judge to strike down the Affordable Care Act.

Most of these companies rely contract workers -- who are essential to the gig economy -- to pick you up in their cars, assemble their groceries and help put together your Ikea furniture. But these flexible positions don’t come with traditional benefits such as health care or vacation time, so instead, many companies such as Uber and Postmates have encouraged these workers to pursue health insurance options that the ACA made available.

The legal decision won't immediately have an impact on those who get their insurance through the ACA marketplaces as it wends its way through the court system. (Read my colleague Paige Winfield Cunningham for a full rundown of what the Obamacare decision means.) But any major change could have a sweeping impact on tech companies that rely on contractors, making it harder for them to recruit people away from traditional payroll jobs.

Venky Ganesan, partner at Uber investor Menlo Ventures, said every on-demand company, including Uber, Lyft, Doordash, Instacart and Postmates, has benefited from the ACA.

“The biggest impact of the ACA that people did not realize was that it separated health care from employment and made the economy more mobile,” he said. “With ACA, suddenly people could decouple their health care from their employment and participate in the gig economy.”

The uncertainty about the ACA's future comes at a critical time for the on-demand economy as it’s poised to get its first test in the public markets. Uber and Lyft are reportedly racing toward initial public offerings, and delivery company Postmates has reportedly interviewed bankers to handle its own initial public offering planned for next year.

One of the critical challenges for on-demand businesses that investors are tracking is how much capital these companies are burning on recruiting and retaining drivers. Ganesan believes any change to the health-care law could hurt the companies’ efforts.

“The entire gig economy works on the fact that the companies don’t need to provide health coverage as the state plans do,” Ganesan said. “Once that assumption is breached, a key asset to their ability to recruit contractors is broken.”

Friday’s ruling, despite its lack of immediate impact, has ratcheted up the political debate around health care, and sets the stage for the Supreme Court to again rule on the law’s constitutionality.

It also again tees Silicon Valley up for a battle with President Trump, who celebrated the Texas judge’s decision on Twitter and called for bipartisan effort to pass a new health-care law:

As Trump cut funding for marketing about the ACA in recent years, technology companies have filled in the gap and launched their own campaigns to remind workers to enroll.

Brent Messenger, spokesman for the online freelancer marketplace Fiverr, said he was “stunned” by the president’s response and said it betrayed a lack of understanding of the U.S. economy’s increased reliance on independent contractors.

“He doesn’t understand what’s going on,” Messenger said.

Fiverr has taken out digital ads this year to remind people about open enrollment, which ended on Saturday. He said according to a Fiverr survey, about 25 percent of freelancers using its service rely on the ACA for health care.

An Uber spokesman told me the company is a supporter of the ACA, and it partners with the health-care start-up Stride Health to help its drivers figure out what health-care plans they should choose. A Lyft spokeswoman said the company also has programs to help drivers choose ACA options, but would not comment on Friday’s ruling because it does not appear anything will change in the short term.

Vikrum Aiyer, Postmates vice president of public policy, said the ruling is a reminder of why the company has sought to provide educational resources about health care to its network of 350,000 independent contractors.

“The routine politicization of Obamacare not only puts millions of Americans in danger — and undermines a mandate voters delivered to Congress & the Administration just one month ago — but it also illustrates a clear need that the private sector, labor, and those in positions of public trust must work together to build a system of benefits that reflects the modern nature of independent work in our economy,” Aiyer said in a statement.

On-demand companies often walk a fine line between providing perks to recruit contractors while at the same time avoiding going so far as to provide benefits that would result in the workers being classified as employees. Over the years, this tension has been exacerbated by lawsuits in which contractors have sued to be recognized as employees, igniting debate over the companies' responsibilities to these workers. Any major change to the ACA could intensify scrutiny of this arrangement. 

Mark Muro, a Brookings Institution senior fellow focused on metropolitan policy, said if he were running Lyft, he would be advocating strongly for the ACA. In a tight labor market, he said the alternative might mean major recruiting challenges.

“Society can’t allow a wholesale shirking of the need to provide benefits to these workers,” he said.

The Washington Post will be hosting an event on The Future of Work tomorrow, featuring conversations with executives from Postmates and Handy, as well as Sen. Mark Warner (D-Va.) and Sen. Todd Young (R-Ind.). You can find more details and sign up for a livestream reminder here. 

BITS, NIBBLES AND BYTES

Some of the Facebook ads linked to a Russian effort to disrupt the American political process are photographed in Washington on Nov. 1, 2017. (Jon Elswick/AP) 

BITS: An analysis of Russian online disinformation efforts surrounding the 2016  election underscored the scope and sweep of its efforts to help elect Trump. The draft of the report for the Senate obtained by the Post also found that tech companies could have done more to share information with investigators, according to The Washington Post's Craig Timberg and Tony Romm. The report, which was prepared  by the Computational Propaganda Project at Oxford University and the social network analysis firm Graphika, described how Russian operatives used all major social media platforms to target American voters during the election and continued to support Trump once he was elected.

While Facebook and Twitter have drawn intense scrutiny from lawmakers and experts, my colleagues reported the new study included details on how Russian operatives also used YouTube and Instagram. Researchers said technology companies should make data more accessible to those who study the issue. “Google submitted information in an especially difficult way for the researchers to handle, providing content such as YouTube videos but not the related data that would have allowed a full analysis,” Craig and Tony wrote. “The YouTube information was so hard for the researchers to study, they wrote, they instead tracked the links to its videos from other sites in hopes of better understanding YouTube’s role in the Russian effort.”

The New York Times obtained an additional report prepared for the Senate that found Russian meddlers went to great lengths to target African-American voters, Scott Shane and Sheera Frenkel reported. This report, prepared by cybersecurity firm New Knowledge, said the Russian influence campaign "used an array of tactics to try to suppress turnout among Democratic voters and unleashed a blizzard of posts on Instagram that rivaled or exceeded its Facebook operations."

Facebook chief executive Mark Zuckerberg appears for a hearing with the House Energy and Commerce Committee in Washington on April 11. (Matt McClain/The Washington Post)

NIBBLES: Several Democratic senators scolded Facebook and said the company has again failed to protect the data of its users after the social network disclosed a new software bug. The glitch, which Facebook said happened in September over 12 days, “may have allowed third-party apps to wrongly access the photos of up to 6.8 million users, including images that people began uploading to the site but didn’t post publicly,” my colleague Tony reported. 

Sen. Edward J. Markey (D-Mass.)  sounded off on Twitter:

Sen. Richard Blumenthal (D-Conn.) also called out Facebook: 

Sen. Ron Wyden (D-Ore.) had some questions for the company: 

Facebook said up to 1,500 third-party apps “may have had access to a broader set of photos than usual” because of the bug. “That includes photos that a user may have started to post, but abandoned before actually publishing, because Facebook keeps a copy of the draft in the event a user might want to finish uploading it later,” Tony wrote.

In this Dec. 4, 2017, file photo, people walk by Google offices in New York. Google is spending more than $1 billion to expand operations in New York City. (AP Photo/Mark Lennihan, File)

BYTES: Google unveiled details about its plan to expand operations in New York with a new campus and thousands of jobs, according to the Wall Street Journal's Douglas MacMillan. “In a blog post Monday, Google said it would lease a large office building at 550 Washington St. in Manhattan’s West Village neighborhood and make it the centerpiece of its new 1.7 million-square-foot Hudson Square Campus,” according to the report. “Google plans to invest $1 billion in capital improvements to the campus, which will also include two nearby buildings at 315 and 345 Hudson Street.”

The search engine giant is joining Apple and Amazon in growing their operations outside Silicon Valley. William Floyd, director of public policy and government relations at Google, told the Journal that Google’s ambition to add 7,000 employees in New York over the next 10 years is “a conservative estimate.” The planned expansion is also set to make Google one of Manhattan’s largest corporate office tenants, according to the Journal. (Amazon founder and chief executive Jeffrey P. Bezos owns The Post.)

PRIVATE CLOUD

Workers prepare to move products at an Amazon fulfillment center in Baltimore on Aug. 3, 2017. (Patrick Semansky/AP)

— Amazon.com has a name for unprofitable items: CRaP. It stands for “Can’t Realize a Profit,” and the company wants to get rid of them as it seeks to make its retail business more profitable, according to the Wall Street Journal's Laura Stevens, Sharon Terlep and Annie Gasparro. Amazon has told manufacturers to change the way they package such products to improve profitability. The CRaP items often cost $15 or less and are costly for Amazon to ship, the Journal noted.

“Amazon also has greater leeway to curb CRaP items because of the rise of independent sellers on its site,” Stevens, Terlep and Gasparro reported. “They have added hundreds of millions of items, helping ensure that Amazon’s virtual shelves are stocked with the variety shoppers expect. And those sales tend to be more profitable for Amazon, which typically collects a 15% cut plus fees for warehousing.”

-- An artificial intelligence start-up selling a “risk rating” of babysitters said it has put its service on “pause” after The Post's Drew Harwell reported that the company's technology was subject to biases. The start-up, called Predictim, said on its website that it would “focus on evaluating how we offer our service and making changes to address some of the suggestions we received.” The company scanned the social media accounts of babysitters and came up with an assessment of their personalities, according to my colleague.

But as Drew wrote last month, Predictim's technology “remains entirely unproven, largely unexplained and vulnerable to quiet biases over how an appropriate babysitter should share, look and speak.” 

— As the dispute between Apple and Qualcomm continues, Apple said it will update the software on iPhones in China to avoid stopping sales of older versions of the phone on the Chinese market, the New York Times's Jack Nicas reported. A court found on Nov. 30 that Apple infringed on two Qualcomm patents and ordered Apple to cease sales in China of the iPhone 6S, 6S Plus, 7, 7 Plus, 8, 8 Plus and X, but Apple hasn't stopped selling those devices, the Times noted. “Apple also asked the court to reconsider its ruling,” Nicas wrote. “The company told the court it made about $13.3 billion on iPhone sales in China in the first quarter of 2018, meaning it would lose millions of dollars a day if it had to stop selling certain phones in the country.”

— More technology news from the private sector:

PUBLIC CLOUD

A worker is seen on the dome of the U.S. Capitol in Washington on Oct. 09. (Matt McClain/The Washington Post)

— An initiative to develop quantum computing is getting closer to becoming law after the Senate approved the National Quantum Initiative Act. “The bill would inject $1.2 billion in funding over 10 years into quantum research, tapping the Department of Energy, the National Institute of Standards and Technology and the National Science Foundation to jumpstart the effort,” according to FCW's Chase Gunter. The House version of the bill passed in September, Gunter reported.

— More technology news from the public sector:

FAST FWD

Demonstrators during a protest at the Amazon fulfillment center in Shakopee, Minn., on Dec. 14. , 2018. (Kerem Yucel/AFP/Getty Images)

— Workers protested the conditions at a Minnesota fulfillment center, increasing scrutiny of the company's treatment of warehouse employees. “Amid chants of ‘Hear our voice,’ a group of about 100 Somali-American workers and their supporters marched to the entrance of Amazon’s Shakopee fulfillment center Friday evening to protest what they called unfair working conditions,” Liz Sawyer of the Minneapolis Star Tribune reported. “The rally, held at the height of the busy holiday season, condemned what the protesters called a lack of diverse leadership, unequal wages and how the online retail giant manages productivity at its largest Minnesota facility.” 

— More news about tech workforce and culture:

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BURN RATE

— Today in funding news:

CHECK-INS

Coming soon

  • Transportation Secretary Elaine Chao delivers a speech at the CES technology show in Las Vegas on Jan. 9, 2019.

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