Small businesses are the heart of the American economy and the chance to set-up your own business and build it has long been seen as central to the ‘American dream,’ but the chaotic nature of the health insurance system is posing real difficulties for such entrepreneurs and their workers.
The potential expiration of enhanced premium tax credits for Affordable Care Act (ACA) Marketplace coverage at the end of 2025 is set to trigger sharp increases in health insurance costs for millions of enrollees, with nearly half of affected adults tied directly to small businesses or self-employment, according to KFF.
The enhanced premium tax credits, originally created under the American Rescue Plan Act (ARPA) and later extended via the Inflation Reduction Act (IRA), have contributed substantially to Marketplace enrollments more than doubling to 24.3 million people in 2025. Currently, over nine in 10 enrollees (92%) receive some level of premium tax credit.
If these enhanced subsidies expire as scheduled, out-of-pocket premiums would rise by over 75% on average for the vast majority of individuals and families purchasing coverage through the ACA Marketplaces.
Analysis of the individual health insurance market reveals that a significant portion of those facing higher premiums are connected to small businesses.
Small Business Affiliation: Approximately 48% of adults under age 65 enrolled in the individual market (direct purchase coverage) are affiliated with a small business.
Specific Groups: This group includes self-employed entrepreneurs, small business owners, and employees of small businesses with fewer than 25 workers.
Dependence on Individual Market: For many employees of small businesses and self-employed individuals, the individual market acts as their main source of comprehensive health insurance outside of traditional employer coverage. Unlike larger firms, small businesses are less likely to offer health benefits, making these workers dependent on the affordability and stability of the individual market.
The scheduled expiration would also severely impact individuals and families whose household incomes place them over 400% of the Federal Poverty Line (FPL). These enrollees would lose eligibility for any premium tax credits, forcing them to bear the full cost of their health insurance premium.
A previous KFF analysis found that 38% of adult individual market enrollees under age 65 making over 400% FPL are self-employed.
Additionally, the risk pool impact associated with the expiration of enhanced premium tax credits is partially driving proposed increases in gross premiums (before tax credits are applied), which are expected to rise by 18%.
This increase will affect Marketplace enrollees who do not receive premium assistance, as well as government costs for tax credits.
The data utilized in this analysis is based on KFF's assessment of the 2024 Current Population Survey (CPS) Annual Social and Economic Supplement.
One alternative for entrepreneurs and employees of SMEs is healthshare schemes which, while not insurance, can offer lower costs and the flexibility valued by many small businesses.