Paying a Premium

Nonemployer small business owners who pay for their own health insurance epitomize two poorly understood features of the US economy: the small business sector and the individual health market. Nonemployer businesses are a large segment of the small business sector, and small business owners are especially likely to purchase health insurance on the individual market—4.4 million self-employed business owners purchased health insurance on this market in 2014. The economic experiences of these small business owners can inform both the well-being of the small business sector and the condition of a substantial share of the individual health insurance market.

This brief focuses on the experiences of these small business owners purchasing health insurance for themselves or their families. We constructed a sample of over 30,000 firms who hold business banking deposit accounts with Chase to produce a monthly view of health insurance premium payments (HIPP) and other operating expenses from January 2014 to April 2017.

Our findings are four-fold:

Finding 1: In 2017, the typical nonemployer small business spent about $500 per month on health insurance premiums.

Finding 2: Nonemployer small business owner health insurance payments have grown substantially since 2014, although the rate has slowed.

Finding 3: Nonemployer small businesses with higher HIPP burden levels were more likely to stop purchasing health insurance on the individual market.

Finding 4: Nonemployer small business health insurance premium payment levels and burden varied widely by metropolitan area and industry.

The health insurance premium payments of nonemployer small business owners are large, growing quickly, and pose an increasing economic burden to small businesses. Policy makers should consider the impact of health insurance market reforms on these sometimes financially fragile small businesses and their owners.