Getting Started February 26, 2010, 3:00PM EST

Outsourcing Firm's Latest Offering: Health Insurance

As companies increase their reliance on freelancers, virtual outsourcer oDesk plans to sell health insurance to its 150,000 U.S. workers

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Antonia Musto's health insurance is running out. After she was laid off from a media company in 2008, the former staff accountant continued her prior health coverage through COBRA, the law that allows terminated workers to buy into their old plans for 18 months. In the meantime, Musto, 38, has built a solid freelance career working from her home in West Pittston, Pa., through oDesk, a virtual outsourcing firm. Her COBRA benefits expire next month, though, and individual health plans are too costly for her. Musto's choice seems clear: give up freelancing or give up health insurance.

A growing number of workers are shifting from traditional jobs to freelance, temporary, or contingent work, whether by choice or necessity. They often struggle to find health insurance they can afford. A new plan by oDesk to offer freelancers access to group health insurance may change that for workers facing Musto's dilemma.

Six-year-old Menlo Park (Calif.)-based oDesk connects remote contract workers with companies for tasks like data entry, Web design, or copywriting. ODesk normally takes a 10% cut of each transaction in exchange for handling the billing process and monitoring remote workers by taking screenshots of their computer desktops. Through a program launched in December called oDesk Payroll, workers in the U.S. who book at least 30 hours a week on the site can join the company as W-2 employees, allowing them to buy health insurance at group rates. ODesk's fee will double to 20% for these workers to cover the extra Social Security and Medicare payroll taxes it will assume as an employer. The payroll service makes oDesk the first of a cohort of freelance marketplace firms—including sites like Guru.com and Elance—to offer access to benefits.

Sixty-seven oDesk workers have signed up to join the program so far, and the company estimates about 500 hit the 30-hours-a-week to qualify. The firm also plans to roll out an individual health insurance option in March for people who work fewer hours, CEO Gary Swart says. He says the "price will be very competitive with the more affordable individual plans on the market," and it will be open to the 150,000 oDesk workers in the U.S., regardless of how many hours they work. (The site has 472,000 workers globally.)

Musto says the plan helped her decide to turn down a job offer and continue freelancing. The oDesk group rates are competitive compared to individual insurance she priced. The cost of insurance through oDesk Payroll, offered by Anthem Blue Cross (WLP), varies by the plan and age of the worker. Basic plans start between $100 and $300 a month for individuals, though the high range of more expensive plans tops $1,000. Because they have access to group health plans, oDesk workers can't be excluded for preexisting conditions as they can be on the individual market.

More Insurance Options

As freelancing becomes a reality for more of the workforce, more insurance options are opening up as well, though the menu is still limited and the prices are almost always higher than what employees pay for group coverage. In January the National Association for the Self-Employed, a Washington group representing 250,000 microbusiness owners, started offering members in 20 states access to individual insurance policies through Golden Rule Insurance Company, United Health's (UNH) individual insurance division.