ACA Drove Record Coverage Gains for Small-Business and Self-Employed Workers

Millions of small-business and self-employed workers gained coverage under the Affordable Care Act (ACA). Their uninsured rates reached record lows in 2022, due in part to policies that stabilized Medicaid coverage and enhanced premium tax credits to lower the cost of health coverage for millions of people in the ACA marketplace. States that adopted the ACA Medicaid expansion also played an important role. Extending and building on these policies will drive further progress.

Self-employed workers and small-business employees have had persistently higher uninsured rates than employees of large businesses. Relatively larger shares of small-business and self-employed workers have lower incomes, making health insurance premiums less affordable. And small businesses have long been less likely to offer health coverage to their employees than large businesses, frequently citing lack of affordability, while facing higher administrative costs per worker and less ability to pool risk.

Before the ACA, small-business and self-employed workers were often limited to unaffordable coverage options in the individual and small-group markets. In the individual market, insurers could charge people with pre-existing medical conditions like cancer or diabetes much more — or deny them coverage altogether. In the small-group market, where many small businesses purchased health insurance, high medical costs for one enrollee could cause insurers to raise premiums for the whole firm.

The ACA addressed these challenges through several key provisions:

• It established marketplaces with financial assistance available to low- and moderate-income workers to help more people purchase affordable comprehensive coverage in the individual market. It made financial assistance available for people who lack access to affordable coverage through their employer, a common condition among small-business and self-employed workers.
• Insurers were prohibited from denying coverage and charging higher premiums for people with pre-existing medical conditions.
• Insurers in the individual and small-group markets were disallowed from charging higher premiums due to people’s health status or most other characteristics, including occupation or industry, and insurers were required to set premiums based on the health care costs broadly spread across their customers in the market. For example, in the small-group market before the ACA, one worker’s expensive illness could cause the premiums for the whole firm to spike.
• Small-business and self-employed workers with low incomes became eligible for coverage under the ACA’s Medicaid expansion, which let people with incomes up to 138 percent of the poverty level enroll in Medicaid in states that adopted expansion.

As the ACA’s major coverage provisions went into effect, the uninsured rate for employees of small businesses (those working for firms with fewer than 100 workers) dropped from 25.2 percent in 2013 to 17.4 percent in 2016. In recent years, their uninsured rate fell further, and in 2022 reached a record low of 16.3 percent. There were 4.9 million fewer uninsured employees of small businesses in 2022 than in 2013.

Trends for self-employed workers were similar, with their uninsured rate falling from 27.3 percent in 2013 to 18.4 percent in 2016, reaching a record low of 16.4 percent in 2022. The number of uninsured self-employed workers fell by 1.3 million from 2013 to 2022.

Together, more than 6.2 million small-business and self-employed workers have gained coverage since the ACA’s major coverage provisions were implemented.

  

Coverage improvements for both groups were driven by enrollment in the ACA marketplace and Medicaid. From 2013 to 2022, Medicaid coverage increased by 2.5 million for employees of small businesses and 1.3 million among self-employed workers, according to Census data. And 2.6 million marketplace enrollees aged 21-64 were small business owners or self-employed in 2021, an analysis of Treasury Department tax data found using definitions of small business ownership and self-employment based on income and other factors. That accounted for about a quarter of all marketplace enrollment.

These gains can be advanced further. Recent enhancements to premium tax credits in the ACA marketplace lowered the cost of health coverage for nearly all of the 19 million people receiving the credits, cut the number of people who are uninsured by 4 million, and helped drive record enrollment in the marketplace in 2024. These enhancements, set to expire after 2025, should be made permanent and built upon. And for workers below the poverty level, state or federal action is needed to close the Medicaid coverage gap in the states that have not adopted the ACA’s Medicaid expansion.