You're mostly right, although the way I see it is this: there are a few subclasses of independent contractor. At the top are people with high hourly rates who have niche skillsets and want to work on their own with minimal involvement in the company with which they have a contract. In the middle are the perma-temps involved in the Microsoft lawsuit or at H-1B shops, usually fairly well-paid but lacking many benefits like stock grants. At the bottom are the precarious underclass of people outlined in the article who make close to minimum wage. Then of course you have the gig workers (Uber, Instacart, etc.) who are paid piecemeal.
It used to be the people at the top could have their cake & eat it too, where sometimes they'd have long open-ended contracts with a company directly - maintaining independence but also getting a steady paycheck. Now they have to shack up with one of these bodyshops that gets a fat cut of their labor, which disincentivizes the setup. I was certainly glad to get out of it; the whole operation felt shady from start to finish. Politically, this class of people used to be available as cover for the entirety of the contracting workforce. Did lawmakers really want to rob these All-American Mavericks of their Freedom? Anything that further disincentivizes the mock W-2 job route is a good thing IMO. The current situation of course is not sufficient but it's better than the free-for-all it used to be. I guess you could say it has hightened the contradictions.
Some might say given the reality of these distinctions within independent contractors, we should segregate protections based on income. I don't think that'll work. Any policy targeted at helping only those of lower means will quickly become a policy to be watered down further and further and further as all the incentives in the system are aligned toward greater exploitation. By including all classes of independent contractor in any legislation, we make it stronger against attacks that would land hardest on the worst off. If that shuts down some avenues of employment for people at the top, well, so be it. I don't think scoped contracts will ever go away.
Worth noting this entire thing is to some degree a sideshow of the larger debate about health insurance and how it's tied to employment. If medicare for all were passed, a lot of these issues would just go away.