When Jennifer Miller started her artisan bakery in Portland, Oregon, she faced a challenge familiar to many small business owners: how to provide health coverage for her six employees while keeping her fledgling business afloat. “I wanted to offer health insurance, but the quotes I received would have bankrupted us,” she recalls. Instead, Jennifer discovered that three of her part-time staff qualified for Medicaid coverage, allowing them to keep working while maintaining access to healthcare.
Jennifer’s story reflects a critical yet often overlooked reality across America’s small business landscape. Medicaid serves as an essential healthcare safety net for millions of workers employed by small businesses that cannot afford to offer comprehensive health benefits. According to recent data from the Kaiser Family Foundation, approximately 21% of small business employees rely on Medicaid for their health coverage, compared to just 13% of workers at larger companies.
The relationship between small businesses and Medicaid creates a symbiotic economic partnership that benefits local economies. Small businesses employ nearly half of America’s private workforce, yet only 30% of businesses with fewer than 50 employees offer health insurance, compared to 97% of businesses with 50 or more workers. This coverage gap places many small business employees in a precarious position when it comes to healthcare access.
For Carlos Mendez, who runs a landscaping company in Arizona, Medicaid has been instrumental in maintaining his workforce stability. “Two of my best workers have children with special healthcare needs,” he explains. “Without Medicaid coverage for their families, they simply couldn’t afford to keep working for a small operation like mine.”
Healthcare economists point to this hidden benefit of Medicaid expansion. In states that expanded Medicaid under the Affordable Care Act, entrepreneurship increased by approximately 3.9% compared to non-expansion states, according to research published in the Journal of Health Economics. This suggests that Medicaid doesn’t just support workers but also enables more people to take the risk of starting their own businesses.
“Medicaid creates a foundation that allows small businesses to compete for talent,” explains Dr. Sarah Jenkins, health policy researcher at the Urban Institute. “When workers know their healthcare needs are covered, they can take jobs they love at smaller companies that might offer lower wages but better quality of life or more meaningful work.”
The economic impact extends beyond individual businesses. Small businesses collectively generate roughly 44% of U.S. economic activity, according to the Small Business Administration. When these enterprises can access reliable workers who aren’t forced to leave for larger employers with better benefits, local economies thrive.
The COVID-19 pandemic further highlighted this relationship. As small businesses struggled to survive lockdowns and economic disruption, Medicaid enrollment increased by nearly 20%. This safety net prevented many workers from losing healthcare access during the crisis, allowing them to return to work as businesses reopened.
Despite these benefits, challenges remain. In states without Medicaid expansion, many small business employees fall into the “coverage gap” – earning too much to qualify for traditional Medicaid but too little to afford private insurance. This disparity affects approximately 2.2 million Americans, many of whom work for small businesses.
As policymakers debate healthcare reform, understanding Medicaid’s role in supporting small business employment provides important context. When Jennifer’s bakery eventually became profitable enough to offer health benefits, she found her employees were more loyal and productive. “Knowing they had healthcare security through those early years made all the difference,” she says. “We wouldn’t be here today without it.”
For America’s small business ecosystem to thrive, recognizing the interdependence between public health programs and entrepreneurship may be key to developing policies that support both workers and the small businesses that employ them. The conversation around Medicaid must extend beyond individual healthcare needs to acknowledge its crucial role in sustaining our small business workforce.
Learn more about healthcare coverage options at https://epochedge.com/category/health/ and stay updated on policy developments affecting small businesses at https://epochedge.com/category/news/.
