The Impact of the COVID-19 Pandemic and Recent Federal Policies on Small Business Health Insurance

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Despite disruptions caused by the COVID-19 pandemic, the small-group health insurance market remained relatively stable over the last year. Yet, larger trends of rising costs and decreasing participation in the small-group market continue.



The Issue

Small businesses were among the employers most negatively affected by the COVID-19 pandemic. While the market saw short-term relative stability, small-group insurance costs are increasing and the number of small employers offering health coverage is falling, continuing trends that pre-date the pandemic.

Key Findings

  • Small businesses’ health coverage offerings remained relatively stable amid the COVID-19 pandemic, contrary to some early predictions.

  • The share of small employers offering comprehensive health benefits has steadily declined over the last two decades, but employers that continue to offer benefits recognize its importance in attracting and retaining skilled employees.

  • Many small employers are shifting to coverage exempt from Affordable Care Act rules in response to rising costs, resulting in an unsettled market.


Over the past 20 years, the share of employers offering comprehensive health benefits dropped from almost half to less than one-third. If left unaddressed, this will continue to create a more costly pool of enrollees for insurers to cover in the small-group market. Researchers predict this trend will only accelerate without state or federal regulatory action to promote a more diverse and stable small-group market.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.