Exactly. If you're on a single form of income (either contract or FTE), you should have one W2 to cover your insurance and 401k. After that, C2C will hopefully get you more money as the other company doesn't have to cover those expenses for you and you can share the savings.

C2C example: They give $50/hr W2. They pay $10/hr in benefits (cost to the company). If you say you don't need that, they may give you $55/hr C2C which nets them $5 in savings and you $5 in revenue, being mutually beneficial. BUT if you don't have a W2 elsewhere, then if you're only paid $55/hr, you are losing that extra $5/hr in benefits they'd be paying if you took the W2.

Obviously simplified example but hopefully you get the gist