Administration Touts Small Business Tax Credits For Health Insurance, Rules Issued

Obama administration officials released details Monday for a new program offering tax credits to small businesses that provide health care for workers. The tax credits are a key provision of the new health law. 

Congress Daily:"The Obama administration ramped up efforts to sell the healthcare overhaul law to small businesses, just days after a national small-business organization joined legal challenges to the law. The guidance explains that small businesses can choose from three options to calculate the number of hours worked by employees, a key calculation for firms trying to qualify for the credit." Shortly after the rules were announced Nancy-Ann DeParle, the director of the White House Office of Health Reform, told a meeting of emergency room physicians, "It's one of the largest tax cuts for health care in history" (McCarthy, 5/17).

ModernHealthcare: "New guidance issued by the Treasury Department makes it clear that small businesses may receive state and federal tax credits, Michael Mundaca, Treasury assistant secretary for tax policy, said during a teleconference. In other words, a business's credit will not be reduced if it also receives a healthcare tax credit or subsidy from a state, he said. ... Officials estimated that up to 4 million small businesses may qualify for this tax credit, which would be available starting this year, although businesses wouldn't receive the credit until they filed their taxes in 2011" (Lubell, 5/17).

The Washington Post: Not all businesses "will be eligible for the credits immediately, because not all of them currently offer insurance ... But all were sent government postcards alerting them to the availability of the credit -- which covers up to 35 percent of their health-care costs -- in hopes of spurring more to offer coverage, Mundaca said." In addition, the Internal Revenue Service earlier today issued "a series of rules clarifying eligibility for the credit, which is available to businesses with fewer than 25 employees and paying an average salary of less than $50,000 a year." The tax credit's value phases out as a small business' number of employees increases and as salaries rise" (Montgomery, 5/17).

Bloomberg Businessweek: Karen Mills, the head of the Small Business Administration, said, "We know that small businesses want it, because right now half of the small businesses between three and 10 people don't provide health care, and they're looking for it." These firms can gather the credits "for dental and vision care, on top of standard health insurance, according to the guidance." Manduca noted that the Obama administration does not have an estimate of how many of small businesses will use the credit (Armstrong, 5/17).

The Associated Press: Business groups are giving the plan mixed reviews. Many small business won't qualify for it. "The full benefit goes to companies that have 10 or fewer workers with average salaries of $25,000 or less. They can get Uncle Sam to pick up 35 percent of their premiums. But sole proprietors aren't eligible. And neither are firms with 25 or more employees, or average wages of $50,000 and above." Some analysts say the credit's main benefit will be felt by those companies that already provide coverage to their employees. But "John Arensmeyer, head of the advocacy group Small Business Majority, said business owners have expressed strong interest in learning more about the credit" (Alonso-Zaldivar, 5/17).

Dow Jones Newswires/Wall Street Journal: "Some small-business advocates criticized the tax credit Monday as too limited in scope. Bill Rys, tax counsel for the National Federation of Independent Business, said more than two-thirds of small firms will be excluded because they are too large or don't currently offer health insurance. ... The NFIB estimated that about 1.8 million firms would meet the size and coverage restrictions for the credit. But many of those will likely be ineligible because average wages will be higher than the $50,000 threshold. " The NFIB opposed the health law and has joined a suit brought by states challenging its constitutionality (Vaughn, 5/17).

In a related story, the Los Angeles Times profiles a local business owner. Maurice Stein's cosmetics retail and manufacturing firm in Burbank, Calif., has suffered with the recession, but he has continued to offer health insurance to his remaining employees. "He spends $11,000 a month to cover just half of the cost of premiums on the Anthem Blue Cross PPO and HMO policies that he provides the 40 people who still work for him."

"Stein's company is small but still too big to qualify for the tax credits that are meant to help small businesses provide health insurance to their employees. Under the Patient Protection and Affordable Care Act signed into law in March, companies with 10 employees or fewer will get rebates from the federal government for up to 50% of what they spend on their employees' care. Without the boost from the tax credit, Stein will face a difficult choice. Should he cancel the insurance if his fortunes don't improve?" (Bernstein, 5/17).