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.

Pie chart describes about Share of all small Businesses by employment

SHARE OF ALL SMALL BUSINESSES BY EMPLOYMENT

80.4 percent of all small businesses are nonemployers, 18.9 percent of all small businesses have 1 to 49 employees, and 0.7 percent of all small businesses have 50 to 499 employees.

Source: US Census Bureau

© 2018 JPMorgan Chase & Co.

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.

Line graph describes about HIPP Growth rates

HIPP GROWTH RATES

  25th Percentile (Cross-sectional Sample) 25th Percentile (Panel Sample) Median (Cross-sectional Sample) Median (Panel Sample) 75th Percentile (Cross-sectional Sample) 75th Percentile (Panel Sample)
Jan 2014 2.1% 2.5% 10.5% 9.4% 18.6% 16.0%
Feb 2014 2.5% 2.5% 10.4% 8.6% 19.3% 16.3%
Mar 2014 0.2% 1.4% 10.4% 8.6% 19.7% 16.9%
Apr 2014 1.2% 1.9% 10.5% 8.6% 20.1% 17.8%
May 2014 0.3% 1.8% 10.7% 9.6% 20.0% 17.9%
Jun 2014 0.0% 1.6% 10.9% 9.7% 20.8% 19.5%
Jul 2014 0.0% 1.6% 10.5% 9.3% 20.6% 19.9%
Aug 2014 0.0% 1.5% 10.3% 9.1% 20.5% 19.8%
Sep 2014 0.0% 1.5% 9.8% 9.0% 20.2% 19.5%
Oct 2014 0.0% 1.5% 9.5% 8.8% 19.9% 19.2%
Nov 2014 0.2% 1.5% 9.7% 8.6% 21.1% 19.1%
Dec 2014 0.8% 1.5% 9.5% 8.6% 21.7% 19.2%
Jan 2015 1.6% 1.6% 10.7% 9.1% 21.3% 18.9%
Feb 2015 1.6% 1.6% 11.3% 9.8% 20.8% 18.0%
Mar 2015 1.3% 1.6% 10.4% 9.3% 20.6% 18.2%
Apr 2015 1.0% 1.0% 10.0% 8.8% 20.2% 17.5%
May 2015 0.5% 0.5% 9.2% 8.2% 19.2% 16.6%
Jun 2015 0.0% 0.0% 8.9% 8.0% 18.8% 16.3%
Jul 2015 0.0% 0.0% 9.0% 7.8% 19.3% 16.3%
Aug 2015 0.0% 0.0% 9.3% 7.9% 19.5% 16.3%
Sep 2015 0.0% 0.0% 9.5% 8.0% 19.8% 16.3%
Oct 2015 0.0% 0.0% 9.0% 7.8% 18.8% 16.0%
Nov 2015 0.0% 0.0% 9.1% 7.8% 19.0% 16.0%
Dec 2015 0.0% 0.0% 8.8% 7.7% 18.8% 16.4%
Jan 2016 0.0% 0.0% 8.4% 7.6% 18.6% 16.4%
Feb 2016 0.0% 0.0% 8.2% 7.4% 18.5% 16.5%
Mar 2016 0.0% 0.0% 8.2% 7.8% 18.5% 16.7%
Apr 2016 0.0% 1.4% 8.1% 8.3% 18.5% 16.3%
May 2016 0.0% 2.5% 8.2% 8.6% 18.5% 16.1%
Jun 2016 0.0% 2.6% 8.4% 8.5% 18.5% 15.8%
Jul 2016 0.0% 2.5% 8.1% 8.2% 18.2% 14.9%
Aug 2016 0.0% 2.6% 8.1% 7.8% 18.6% 14.2%
Sep 2016 0.0% 2.0% 7.4% 7.4% 17.4% 13.8%
Oct 2016 0.0% 2.0% 7.6% 7.4% 18.0% 13.9%
Nov 2016 0.0% 1.4% 7.8% 7.3% 18.7% 13.6%
Dec 2016 0.0% 1.3% 7.4% 7.2% 17.6% 13.8%
Jan 2017 0.1% 1.4% 7.5% 7.1% 16.7% 13.7%
Feb 2017 0.0% 0.4% 7.1% 6.6% 16.8% 13.9%
Mar 2017 0.0% 0.0% 8.1% 7.3% 23.0% 16.4%
Apr 2017 0.0% 0.0% 7.1% 6.8% 19.7% 16.7%

Source: JPMorgan Chase Institute

© 2018 JPMorgan Chase & Co.

Bar graph describes about Percent of firms exiting the sample

PERCENT OF FIRMS EXITING THE SAMPLE

HIPP Burden in April 2016 Discontinued HIPP Insufficient Activity Closed account
greater than or equal to 6.5% 26% 13% 3%
3.5% to 6.5% 24% 11% 2%
2.0% to 3.5% 20% 11% 2%
1.0% to 2.0% 21% 10% 3%
less than 1.0% 19% 10% 3%

Source: JPMorgan Chase Institute

© 2018 JPMorgan Chase & Co.

Authors

Chi Mac

Business Research Director

Chris Wheat

President, JPMorganChase Institute

Diana Farrell

Founding and Former President & CEO