Center for American Progress

Fact Sheet: How Enhanced Premium Tax Credits for Affordable Health Care Empower Self-Employed Americans
Fact Sheet

Fact Sheet: How Enhanced Premium Tax Credits for Affordable Health Care Empower Self-Employed Americans

Without congressional action to extend enhanced tax credits beyond 2025, self-employed workers will face reduced access to affordable and comprehensive coverage.

An exam room in a CVS minute clinic set up like a doctor's office
An exam room in a CVS minute clinic is seen, January 2016. (Getty/Gabe Souza/Portland Portland Press Herald)

Self-employed Americans, including freelancers, independent contractors, and small-business owners, represent an increasing share of the U.S. economy. According to the Current Population Survey, as of August 2024, 17.1 million individuals were self-employed, comprising 10.6 percent of the total working population.

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Accessing health insurance, especially before the passage of the Affordable Care Act (ACA), has been a challenge for this population. Unlike the more than 158 million Americans with job-based coverage, self-employed individuals must navigate the health insurance market on their own. Before the ACA, many self-employed workers faced significant barriers to securing coverage, including denial of coverage, due to preexisting conditions, high premiums, and limited plan choices. Accordingly, in 2013—one year before the launch of the ACA marketplaces—the uninsured rate for self-employed nonelderly adults was 30 percent.

The ACA improved opportunities for self-employed workers by providing them with access to affordable, comprehensive coverage. The law introduced consumer protections, established the individual marketplaces, and provided people with financial help to buy coverage on those marketplaces through premium tax credits and reductions in out-of-pocket costs. Enhancements to those tax credits, introduced as part of the American Rescue Plan and extended via the Inflation Reduction Act, further improved health insurance affordability for a broader range of Americans, including self-employed workers. For example, in 2022, a single 27-year-old making $40,000 per year saved an average of $1,340 on the second-lowest-cost silver plan premium. The tax credit enhancements are set to expire at the end of 2025 unless Congress acts to extend them or to make them permanent. Failure to do so will likely lead to significant coverage losses for self-employed Americans.

See also

Enhanced premium tax credits improved marketplace coverage affordability for a wider range of self-employed workers

  • The enhancements expanded financial assistance to more middle-class individuals and families, making tax credits available to households with annual incomes above 400 percent of the federal poverty level (FPL), and ensured that people do not spend more than 8.5 percent of their household income on premiums for silver benchmark plans.
  • Previously, enrollees with household incomes above 400 percent of the FPL were ineligible for any financial assistance. Enrollees could lose their entire premium tax credit for earning just $1 over the cutoff, which disproportionately affected self-employed individuals, whose incomes often fluctuate seasonally or annually.
  • With help from the tax credit enhancements, 82 percent of self-employed workers and small-business owners bought coverage with a premium tax credit in 2022—nearly 285,000 of whom had household incomes above 400 percent of the FPL.

Affordability improvements contributed to coverage gains among the self-employed

  • In 2022, self-employed workers and small-business owners accounted for 28 percent of total marketplace enrollees. More than 1.7 million self-employed workers ages 21 to 64 had marketplace coverage.
  • In 2022, the uninsured rate for self-employed workers hit a record low of 16.4 percent.
  • These affordability improvements have been particularly critical in states with large shares of self-employed workers, such as Florida, Georgia, and Pennsylvania. In 2022, more than one-fifth of small-business owners and self-employed individuals in the states of Florida, Georgia, Maine, North Carolina, Nebraska, New Hampshire, South Carolina, Utah, and Wyoming had marketplace coverage.
See also

Enhanced premium tax credits are helping narrow racial gaps in the coverage rates of self-employed workers

  • America’s self-employed population is becoming increasingly diverse. From 2017 through 2022, the share of self-employed workers who were Black rose from 5.8 percent to 6.8 percent; the share who were Hispanic increased from 8.4 percent to 9.9 percent. Comparatively, the share of self-employed workers who were white increased from only 11.3 percent to 11.5 percent.
  • Enhanced premium tax credits have contributed to historic reductions in uninsured rates among Black and Latino From 2020 to 2023, marketplace enrollment grew by 95 percent for Black Americans and by more than 100 percent for Latino Americans. Extending these enhancements can help sustain and build on these gains.

Enhanced premium tax credits support economic independence for self-employed workers by making coverage more affordable to obtain

  • Research has found that access to affordable health care supports financial stability and economic advancement by reducing the burden of medical costs. This financial security allows individuals to focus on other economic goals, such as growing a business, further contributing to economic mobility.
  • Extending the enhanced premium tax credits will allow self-employed people to confidently take on the uncertainties of entrepreneurship—such as fluctuating income and market instability—without the fear of losing access to essential health coverage.

Conclusion

The ACA marketplaces have played an essential role in providing health coverage to America’s self-employed workers. Thanks to the Inflation Reduction Act, enhancements to the premium tax credits have made it easier for self-employed Americans to access affordable, comprehensive health insurance. The enhanced tax credits have also helped close gaps in uninsured rates for people of color, who represent an increasing share of self-employed American workers. As Congress considers the future of the ACA, extending and making these enhanced tax credits permanent should be a priority. Making enhanced premium tax credits a lasting feature of the national health care system would foster entrepreneurship, continue reducing coverage disparities, and support a growing segment of the U.S. workforce.

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Author

Natasha Murphy

Director, Health Policy

Team

Health Policy

The Health Policy team advances health coverage, health care access and affordability, public health and equity, social determinants of health, and quality and efficiency in health care payment and delivery.

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