ABSTRACT
ISSUE: Small-business owners have seen significant gains in health care
coverage for themselves and their employees thanks to the Aordable
Care Act. Though eorts to repeal the law failed in 2017, the current
administration continues to take steps that undermine the law’s progress.
In recent months, new rules have been announced that allow more groups
to establish association health plans and extend the length of short-term
health insurance plans. These changes are likely to impact the stability of
the marketplaces and coverage rates for the small-business community.
GOAL: Examine the Aordable Care Act’s impact on small businesses, solo
entrepreneurs, and small-business employees.
METHODS: Analysis of ACA small-business enrollment data from
established sources, including federal agencies and nonpartisan health care
research foundations, supplemented by analysis of U.S. Census data.
FINDINGS AND CONCLUSIONS: Because of the creation of the individual
marketplaces and the expansion of Medicaid, more entrepreneurs and
small-business employees have health coverage than before the ACA was
implemented. Indeed, the uninsured rate for small-business employees
fell by almost 10 percentage points post-ACA. The ACA also has helped
stabilize health costs for many small businesses that provide coverage,
with the rate of small-business premium increases falling by half following
implementation of the law.
TOPLINES
More small-business employers
and their employees have
health coverage since the ACA’s
insurance marketplaces and
Medicaid expansion took eect.
The ACA helped stabilize health
costs for many small businesses
that provide coverage, with the
rate of premium increases falling
by half since 2010.
ISSUE BRIEF
OCTOBER 2018
The Aordable Care Act’s Impact on
Small Business
David Chase
Vice President for National Outreach
Small Business Majority
John Arensmeyer
Founder and CEO
Small Business Majority
This issue brief is available on the Commonwealth Fund’s website at:
https://www.commonwealthfund.org/publications/issue-briefs/2018/
oct/aordable-care-act-impact-small-business.
commonwealthfund.org Issue Brief, October 2018
The Affordable Care Act’s Impact on Small Business 2
BACKGROUND
Since its implementation, the Aordable Care Act has
provided health insurance to more than 20 million
people who couldn’t otherwise get coverage. Many are
small-business owners, self-employed entrepreneurs, or
employees of small companies. More than 5.7 million
small-business employees or self-employed workers are
enrolled in the ACA marketplaces; more than half of all
ACA marketplace enrollees are small-business owners,
self-employed individuals, or small-business employees.
1
Eorts to fully repeal the law have failed so far, but
Congress did significantly alter it by repealing the
individual mandate penalty. In addition, the Trump
administration has announced changes that will
undermine the individual marketplace, including
increasing the length of time a person can use short-
term health insurance and allowing associations to oer
group plans that don’t meet the ACA’s requirements.
These changes ignore the significant benefits the ACA
have oered the small-business and self-employed
communities.
Prior to the ACA, small businesses and their employees
comprised a disproportionate share of the working
uninsured. In 2011, six of 10 of the nation’s uninsured
workers were self-employed or working at companies
with fewer than 100 employees.
2
Recent analyses show
significant gains in coverage for small-business owners,
the self-employed, and small-business employees, with
significant decreases in uninsured rates as a result
of access to ACA marketplaces and the expansion of
Medicaid in many states.
Many small businesses can now more easily aord to oer
coverage to their employees. The ACA’s market regulations
ban insurers from setting premiums based on the health
and demographic profile of a company. Fears that the
ACA would lead to drops in oer rates from employers
were unfounded. While certain provisions of the law need
to be strengthened, this brief reviews the evidence and
finds that the ACA has helped small businesses and their
employees access more aordable and comprehensive
health insurance.
FINDINGS
Drop in Uninsured Rates for Small Businesses
Under the ACA
Prior to the ACA, small-business employees and self-
employed individuals were much more likely to be
uninsured than were employees of larger companies. The
costs associated with providing coverage meant that small
businesses were oen unable to oer employer-sponsored
coverage. Additionally, most insurance companies
charged higher rates to people with preexisting conditions
or discriminated based on health status, gender, or other
characteristics, such as industry type. Market regulations,
the ACA marketplaces, and subsidies have led to a
significant decrease in the uninsured rates for the small-
business community.
Small-business employees
According to U.S. Census data, in 2013 there were 36.3
million nonelderly adults in the United States working
for a business with fewer than 50 employees, 28.1 percent
of whom were uninsured. At that time, uninsured small-
business employees accounted for 40 percent of all
uninsured workers in the U.S.
3
There have been significant decreases in the uninsured
rates since the implementation of the ACA. In 2016, there
were 36.1 million people working at a business with fewer
than 50 employees. Of those, 19.4 percent were uninsured.
4
Self-employed entrepreneurs
There have been similar gains in coverage for self-
employed individuals. Twenty-nine percent of self-
employed adults were uninsured in 2013.
5
As of 2016,
this rate had fallen to 19.2 percent. Almost 12 percent of
these individuals found coverage through Medicaid, with
additional insurance gains coming from marketplace
enrollment.
6
A report from early 2017 by the U.S. Department of the
Treasury found that the ACA marketplaces have been
instrumental in helping small-business owners access
coverage. According to the report, 1.4 million marketplace
consumers were self-employed, small-business owners,
or both, meaning that one of five marketplace users was
a small-business owner or self-employed in 2014. Small-
commonwealthfund.org Issue Brief, October 2018
The Affordable Care Act’s Impact on Small Business 3
business owners and the self-employed were almost three
times more likely to purchase marketplace coverage as
other consumers.
7
Additionally, more than 10 percent
of gig-economy workers received coverage through the
marketplace in 2014.
The ACA marketplaces are critical for small-business
owners and self-employed individuals with low-to-
moderate incomes. Small-business owners and other
independent workers with annual incomes below $40,000
were more likely to use the marketplace to purchase
health insurance compared to other consumers in this
income range. Thirty-three percent of self-employed
individuals, 37 percent of small-business owners, and
36 percent of gig-economy workers with incomes below
$40,000 were enrolled in marketplace coverage.
8
Medicaid Expansion Supports Small-Business
Employees
Many self-employed individuals and small-business
employees gained access to health insurance because of
expanded Medicaid eligibility. The ACA allowed states
to expand Medicaid coverage to adults with income at
or below 138 percent of the federal poverty level (about
$16,600 for an individual and $34,000 for a family of four).
As of 2018, 33 states and the District of Columbia have
expanded Medicaid, resulting in significant decreases in
uninsured rates within these states.
9
In Medicaid expansion states, uninsured rates declined on
average from 18.4 percent in 2013 to 9.1 percent in 2017.
10
In states that did not expand Medicaid, the percentage of
uninsured adults decreased from 22.7 percent in 2013 to
19 percent in 2017, a significantly smaller decline. Medicaid
expansion has directly benefitted small-business owners
and their employees. The rate of self-employed individuals
covered through Medicaid rose from 7.3 percent to 11.6
percent between 2013 and 2016.
11
Similarly, the percentage
of small-business employees covered by Medicaid rose
from 9.1 percent to 13.4 percent over the same time
period. By 2015, the Center on Budget and Policy Priorities
estimates that 1.7 million small-business employees
gained coverage through the expansion of Medicaid.
12
Additionally, according to the U.S. Census Bureau’s 2017
Current Population Survey (based on 2016 data), 13
percent of employees at firms smaller than 25 employees
received health coverage through Medicaid in 2016, while
11.2 percent of employees at firms between 25 and 99
employees were enrolled in Medicaid. Overall, there was
roughly a 50 percent increase in the number of small-
business employees (firms with 99 or fewer employees)
enrolled in Medicaid between 2013 and 2016 (Exhibit 1).
13
Data: Current Population Survey, Annual Social and Economic Supplement, HI-01. Health Insurance Coverage Status and Type of Coverage by Selected Characteristics:
All Races (U.S. Census Bureau, n.d.).
Source: David Chase and John Arensmeyer, The Affordable Care Act’s Impact on Small Business (Commonwealth Fund, Oct. 2018).
More Small-Business Employees Are Getting Medicaid Coverage
4,308
5,998
6,208
6,463
5,094
7,069
7,351
7,649
3,500
4,500
5,500
6,500
7,500
8,500
2013 2014 2015 2016
Fewer than 25 employees 99 or fewer employees
Exhibit 1
Data: Current Population Survey, Annual Social and Economic Supplement, HI-01. Health Insurance Coverage Status and Type of Coverage by Selected Characteristics: All Races (U.S. Census
Bureau, n.d.)
Small-business employees (thousands)
Exhibit 1. More Small-Business Employees Are Getting Medicaid Coverage
commonwealthfund.org Issue Brief, October 2018
The Affordable Care Act’s Impact on Small Business 4
According to a June 2018 report from the Kaiser Family
Foundation, among states that did not expand Medicaid
coverage, an estimated 2.2 million adults are in the
so-called coverage gap.
14
This means they currently do not
qualify for Medicaid nor do they earn enough to purchase
their own coverage in the individual marketplace, but
would qualify for Medicaid if their state were to expand. Of
these individuals, which include 1.1 million working adults,
half (50%) work for small businesses with fewer than 50
employees and an additional 6 percent work at businesses
with 50 to 99 employees. Roughly 616,000 small-business
employees could gain coverage if all remaining states
expanded Medicaid.
Premiums Stabilizing for Small Businesses and
Their Employees
Many small businesses oering health insurance coverage
have seen slower annual premium increases in the years
following the ACA. Since 2010, the increase in small-
business health care premiums has been at the lowest level
in years, following regular double-digit increases prior to
the law’s enactment (Exhibit 2).
More data from the Kaiser Family Foundation’s 2017
Employer Health Benefits Survey show that premiums
continue to be stable for small businesses that oer
coverage to their employees. For all firms with between
three and 199 employees, the average premium increase
from 2016 to 2017 was less than 1 percent. This is lower
than the average premium increases from 2016 to 2017
across all firm sizes, which are 4 percent for single coverage
and 3 percent for family coverage.
15
Analysis of data from the Agency for Healthcare Research
and Quality reveals further evidence of lower average
annual increases in premiums for small businesses aer
the implementation of the ACA. According to the report,
the average premium percent change for an employee
of a business with fewer than 50 employees was just 3.1
percent between 2011 and 2015, down from 5.1 percent
between 2006 and 2010 (Exhibit 3).
16
Data: HHS.gov, Private Health Insurance Protections and Programs (U.S. Department of Health and Human Services, last updated Feb. 12, 2016).
Source: David Chase and John Arensmeyer, The Affordable Care Act’s Impact on Small Business (Commonwealth Fund, Oct. 2018).
Average Yearly Premium Increase in Small-Group Market Dropped by Half
5.2%
10.4%
Post-ACA (2011–2015)
Pre-ACA (2008–2010)
Exhibit 2
Data: HHS.gov, Private Health Insurance Protections and Programs (U.S. Department of Health and Human Services, last updated Feb. 12, 2016).
Average annual percentage increase
Exhibit 2. Average Yearly Premium Increase in Small-Group Market Dropped by Half
commonwealthfund.org Issue Brief, October 2018
The Affordable Care Act’s Impact on Small Business 5
In addition to lower overall premium increases, employee
contributions for employer-sponsored coverage have also
stabilized at small businesses; workers at small firms with
individual coverage paid on average just $9 more toward
their premiums in 2017 than they had in 2016.
17
However,
recent policy changes, such as the repeal of the individual
mandate and weakening of ACA requirements, may cause
premiums to increase in future years faster than they
would have otherwise. It remains to be seen how these
anticipated increases will impact small-group coverage
purchased through the individual marketplaces.
Stability of Employer-Sponsored Health
Insurance Offer Rates
Critics of the Aordable Care Act argued that it would
cause a large number of employers to stop oering health
insurance, but the data do not support this assertion.
Comparisons in coverage from before and aer the
ACA show a decline in the rate of employers oering
health coverage that began well before the passage of
the law. According to the Kaiser Family Foundation, the
percentage of firms oering employer-sponsored health
coverage decreased from 66 percent in 1999 to 59 percent
in 2009, the year before the ACA was passed. For firms
with three to 199 workers, this amounts to an average
annual decrease in coverage of 0.6 percent.
18
Data show that oer rates have stayed roughly the same
post-ACA, and that slight declines have been in line with
national trends that predate the ACA. Overall, the average
annual decrease in oer rates between 2012 — the first
year of major coverage expansions under the ACA —
and 2017 was 0.75 percent, showing that the number
of small employers oering coverage was dropping on
average by less than 1 percent before the ACA’s primary
implementation and is still dropping on average less than
1 percent aer the ACA for firms with between three and
199 workers (Exhibit 4).
Data: Agency for Healthcare Research and Quality, 2001–2015 Medical Expenditure Panel Survey – Insurance Component (AHRQ, n.d.);
and Agency for Healthcare Research and Quality, Insurance Component State and Metro Area Tables (AHRQ, n.d.).
Exhibit 3. Lower Average Annual Increases in Small-Business Premiums
Trend across three ve-year periods Total premium, single Total premium, family
Average annual percentage change, 2001–2005 7.9% 8.3%
Average annual percentage change, 2006–2010 5.1% 5.8%
Average annual percentage change, 2011–2015 3.1% 3.1%
National trends in premiums among private sector establishments with fewer than 50 employees, 2001–2015
Data: Gary Claxton et al., Employer Health Benets Survey 2017 — Figure 2.2: Percentage of Firms Oering Health Benets, by Firm Size, 1999–2017
(Henry J. Kaiser Family Foundation and Health Research and Educational Trust, Sept. 2017).
Exhibit 4. Percentage of Firms Offering Health Benefits by Firm Size, 2012–2017, Pre- and Post-ACA
Firm size 2012 2013 2014 2015 2016 2017
3–9 workers 50% 45% 44% 47% 46% 40%
10–24 workers 73% 68% 64% 63% 61% 66%
25–49 workers 87% 85% 83% 82% 80% 78%
0–199 workers 94% 91% 91% 92% 91% 92%
commonwealthfund.org Issue Brief, October 2018
The Affordable Care Act’s Impact on Small Business 6
Critics of the ACA also predicted that the employer
mandate for companies with more than 50 employees
would lead to job loss or reduction in labor hours, as
employers would cut jobs or move full-time employees to
part-time to reduce health care costs. Thus far, there is no
evidence or analysis that has indicated the ACA has had
negative eects on employment or labor hours.
19
CONCLUSION
As this issue brief shows, the creation of the individual
marketplaces and the expansion of Medicaid have resulted
in more small-business owners and employees accessing
health coverage than before the ACA was implemented.
Many small businesses that provide coverage to their
employees have also seen costs stabilize during this time.
NOTES
1. Authors’ analysis with Small Business Majority. See the
Appendix for more information.
2. Paul Fronstin, Sources of Health Insurance and
Characteristics of the Uninsured: Analysis of the March 2012
Current Population Survey (Employee Benefit Research
Institute, Sept. 2012), p. 15.
3. Henry J. Kaiser Family Foundation, The Uninsured:
A Primer — Key Facts About Health Insurance and the
Uninsured in America: Supplemental Tables (KFF, Dec.
2014), p. 11.
4. Henry J. Kaiser Family Foundation, The Uninsured:
A Primer — Key Facts About Health Insurance and the
Uninsured Under the Aordable Care Act: Supplemental
Tables (KFF, Dec. 2017), p. 10.
5. KFF, The Uninsured, 2014.
6. KFF, The Uninsured, 2017.
7. Adam Looney and Kathryn Martin, “One in Five 2014
Marketplace Consumers Was a Small Business Owner or
Self-Employed,” Treasury Notes (blog), U.S. Department of
the Treasury, Jan. 12, 2017.
8. Looney and Martin, “One in Five,” 2017, Table 2.
9. Commonwealth Fund, Status of Medicaid Expansion
and Work Requirement Waivers (Commonwealth Fund,
updated Sept. 20, 2018).
10. Robin A. Cohen, Emily P. Zammitti, and Michael E.
Martinez, Health Insurance Coverage: Early Release of
Estimates from the National Health Interview Survey, 2017
(National Center for Health Statistics, May 2018), p. 5.
11. Comparison of supplemental tables from KFF, The
Uninsured, 2014 and 2017. (See notes 3 and 4 above.)
12. Sarah Lueck, “Health Coverage Gains for Small-Business
Workers at Risk,” O the Charts (blog), Center on Budget
and Policy Priorities, Jan. 9, 2017.
13. Current Population Survey, Annual Social and
Economic Supplement, HI-01. Health Insurance Coverage
Status and Type of Coverage by Selected Characteristics: All
Races (U.S. Census Bureau, n.d.).
14. Rachel Garfield, Anthony Damico, and Kendal Orgera,
The Coverage Gap: Uninsured Poor Adults in States that Do
Not Expand Medicaid (Henry J. Kaiser Family Foundation,
June 2018).
15. Gary Claxton et al., Employer Health Benefits Survey
2017: Summary of Findings (Henry J. Kaiser Family
Foundation and Health Research and Educational Trust,
Sept. 2017).
16. See also: Urban Institute and Robert Wood Johnson
Foundation, Small Business Health Insurance and the ACA:
Views from the Market 2017 (Urban and RWJF, July 2017),
p. 5.
17. Urban and RWJF, Small Business, 2017, Fig. 6.10, p. 81.
18. Gary Claxton et al., Employer Health Benefits Survey
2017 — Figure 2.2: Percentage of Firms Oering Health
Benefits, by Firm Size, 1999–2017 (Henry J. Kaiser Family
Foundation and Health Research and Educational Trust,
Sept. 2017).
19. Jean Abraham and Anne Beeson Royalty, How Has the
Aordable Care Act Aected Work and Wages? (Leonard
Davis Institute of Health Economics, University of
Pennsylvania, Jan. 2017).
commonwealthfund.org Issue Brief, October 2018
The Affordable Care Act’s Impact on Small Business 7
APPENDIX
Number of Small-Business Owners, Self-Employed People, and Small-Business Employees in the
ACA Marketplaces
Distribution of private sector employment by rm size (thousands)
Year
1–4
employees
5–9
employees
10–19
employees
20–49
employees
50–99
employees
All small rms
(1–99 employees)
2010 5,527 6,221 7,688 10,990 8,252 38,678
2011 5,549 6,216 7,719 11,124 8,414 39,022
2012 5,564 6,298 7,859 11,404 8,635 39,760
2013 5,592 6,323 7,949 11,627 8,780 40,271
2014 5,628 6,374 8,100 11,912 8,884 40,898
2015 5,666 6,410 8,231 12,226 9,099 41,632
2016 5,722 6,476 8,385 12,521 9,270 42,374
Data: U.S. Bureau of Labor Statistics, Table F. Distribution of Private Sector Employment by Firm Size Class: 1993/Q1 Through 2017/Q1, Not Seasonally Adjusted (BLS, n.d.).
Calculations of Small-Business Owners, Self-Employed People, and Small-Business Employees in the
ACA Marketplaces
Total small-business employees and self-employed (<100 workers) 63,238,953
Percent of small-business owners, employees and self-employed in individual market 15%*
Total number of small-business owners, employees and self-employed in individual market 9,485,843
Percent of individual-market enrollees in marketplace 61.6%**
Total number of small-business owners, employees + self-employed in marketplace 5,843,279
Total number of individuals on ACA marketplace 11,100,000**
Total number of small-business owners, employees and self-employed on ACA marketplace 5,742,312
Percent of ACA marketplace enrollees who work for or own a small business 52.64%
Note: Calculations were made by examining enrollment data on small business and small-business employees and comparing to total enrollment in the ACA marketplaces.
* Data: Commonwealth Fund, Biennial Health Insurance Survey, Biennial Explorer Interactive (Commonwealth Fund, n.d.).
** Data: Oce of the Assistant Secretary for Planning and Evaluation, About 2.5 Million People Who Currently Buy Coverage O-Marketplace May Be Eligible for ACA
Subsidies (U.S. Department of Health and Human Services, Oct. 4, 2016), Table 1.
Small-Business (0–99 employees) Workers on Individual Market
2010 2012 2014 2016
Percent 9% 11% 15% 15%
Data: Commonwealth Fund, Biennial Health Insurance Survey, Biennial Explorer Interactive (Commonwealth Fund, n.d.).
Total Individual Marketplace Enrollment (ACA exchange and non-ACA exchange)
Total individual market enrollment 18,000,000 100%
O exchange 6,900,000 38.3%
ACA marketplaces 11,100,000 61.6%
Data: Oce of the Assistant Secretary for Planning and Evaluation, About 2.5 Million People Who Currently Buy Coverage O-Marketplace May Be Eligible for ACA
Subsidies (U.S. Department of Health and Human Services, Oct. 4, 2016), Table 1.
commonwealthfund.org Issue Brief, October 2018
The Affordable Care Act’s Impact on Small Business 8
ABOUT THE AUTHORS
David Chase is vice president for national outreach at
Small Business Majority, leading the team on business
outreach, state advocacy, and development. He serves
on the California health care exchange’s Small Business
Health Options Program Advisory Group and directs
SBM’s national health care policy work. Before joining
SBM more than eight years ago, Chase served for more
than four years in the oce of California Governor Arnold
Schwarzenegger, where he built coalitions with business
and other stakeholder groups to advance the governor’s
agenda. Chase was part of the team responsible for
building the coalition behind Governor Schwarzenegger’s
2007 comprehensive health care reform proposal.
John Arensnmeyer is founder and CEO of Small Business
Majority. He has used his long experience as a business
owner to build SBM into a nationally recognized small
business organization and the leading advocate for critical
public policy issues facing America’s entrepreneurs. In
the past few years Arensmeyer has spearheaded the
growth of SBM’s Entrepreneurship Program, providing
critical practical resources to our nation’s 28 million
small businesses. John was the founder and CEO of ACI
Interactive, an award-winning international interactive
communications company. Earlier, he was the chief
operating ocer of a pioneering multimedia business and
an attorney in New York. Arensmeyer is a frequent speaker
on small business policy issues and a regular guest on
television and radio. In 2009 he was an active participant
at the White House summit on health care reform. He
testifies regularly before congressional committees, and
has briefed White House ocials and congressional
leadership on small business policy issues. Arensmeyer
serves as Board Chair for California’s Insure the Uninsured
Project. He has led a study group at Harvard’s Kennedy
School of Politics, and has served on the Association for
Enterprise Opportunity’s Economic Impact Council and
Micro Capital Task Force.
Editorial support was provided by Deborah Lorber.
For more information about this brief, please contact:
David Chase
Vice President for National Outreach
Small Business Majority
dchasesmallbusinessmajority.org
About the Commonwealth Fund
The mission of the Commonwealth Fund is to promote a high-
performing health care system that achieves better access,
improved quality, and greater efficiency, particularly for
society’s most vulnerable, including low-income people, the
uninsured, and people of color. Support for this research was
provided by the Commonwealth Fund. The views presented
here are those of the authors and not necessarily those of the
Commonwealth Fund or its directors, officers, or staff.
