The unsung beneficiaries of Obamacare marketplaces: small businesses

The debate surrounding Affordable Care Act (ACA) marketplaces can seem outsized, because most Americans get insurance through their employers anyway.

But one group of employers—small businesses—depends heavily on those marketplaces, after the model solved several challenges those businesses faced before the healthcare reform law took effect.

That's the takeaway from a new report published this week by Small Business Majority, which analyzed rates of uninsured workers in small businesses between 2013 and 2016. Those years saw significant coverage gains in employees of small businesses between those who could join a new marketplace and those who were now covered by Medicaid.

"More than 5.7 million small-business employees or self-employed workers are enrolled in the ACA marketplaces, and more than half of all ACA marketplace enrollees are small-business owners, self-employed individuals or small-business employees," the organization wrote in its report. "Given recent debate and threats to the future of the ACA, it is critically important for policymakers to understand the law’s benefits to the small-business community, which now has access to better, more affordable health coverage."

As the report noted, before the passage of the ACA, small-business owners often had trouble insuring their workers—and even themselves. The small size of these firms made employer group plans prohibitively expensive for some, and the market for individuals at the time lacked protections for those with pre-existing conditions.

As a result, in 2011, over 60% of the country's uninsured workers were either self-employed or working at a firm with fewer than 100 workers, according to the report.

Changes in the uninsured rate for small-business employees—based on two analyses. (Courtesy of Small Business Majority)

Since then, many small-business owners and employees have sought healthcare on the newly tempered individual market. Small Business Majority calculated that more than 5.8 million owners, employees and self-employeds gained insurance through the ACA marketplaces in the examined period. 

That casts somewhat of a different light on the term "individual market." In fact, most marketplaces enrollees fall into this category of small-business workers.

Increase in small-business employees enrolled in marketplace plans. (Courtesy of Small Business Majority)

Healthcare coverage can make a big difference to small businesses, which often run on small margins and take on the individual risk of their employees. The study connected with several individuals who credited the marketplaces with allowing their business to remain open.

In addition to the marketplaces, many of the insurance gains among small- and midsize business (SMB) workers were also due to the Medicaid expansion. In states that opted into the expansion, the Medicaid eligibility threshold rose to 133% of the poverty level, enabling some low-income workers to gain benefits for which they previously weren't eligible. 

Increase in small business employees enrolled in Medicaid. (Courtesy of Small Business Majority)

Coverage increases like these are life-changing for the individuals who gain coverage. But insurance markets tend to benefit as well when sick or at-need individuals are given multiple routes to gain coverage—after the ACA was implemented, average annual premium increases in the small group employer market dropped by half. 

(Courtesy of Small Business Majority)

However, Small Business Majority warned that recent changes by the Trump administration, including the repeal of the individual mandate and the expansion of short-term insurance options, could undermine the gains SMBs depend upon.

"The current administration and Congress have made repeated attempts to repeal or undermine the Affordable Care Act," the report said. "These changes ignore the significant benefits the small business and self-employed community has enjoyed from the ACA."