Skip to content

Small Business Owners Have Mixed Reviews On Health Law’s Tax Credits

Everyone wants a tax credit, right?

Maybe not. Employers, particularly small businesses, are fretting over provisions in the health overhaul they say could burden their companies. They are the same provisions Democrats point to as a plus: tax credits to help small businesses offer health insurance coverage to their employees.

The U.S. Chamber of Commerce and the National Federation of Independent Business say the tax credits, which will provide a credit worth 50 percent of an employer’s contribution toward employee health insurance premiums for the smallest firms, will actually do little to help small businesses afford health insurance. The credits are available in full to firms with 10 or fewer employees who offer an average wage of $25,000 or less. The credit is reduced for employers who have as many as 25 employees and average wages of up to $50,000 annually. Employers with more employees or higher average wages don’t get the credit at all.

In addition, the credits are only available for six years, further complicating long-term efforts to help small businesses afford providing health insurance for their employees, said Amanda Austin, director of federal public policy for the NFIB, which opposed the Democrats’ health reform efforts and the new law.

The tax credit is emerging as a flashpoint in the ongoing debate about how the reform will affect costs and insurance affordability.

Austin, who spoke Monday at a U.S. Chamber of Commerce forum on what health reform may mean for businesses, said that although some small businesses’ efforts to provide their employees with coverage might be helped by the tax credit, businesses don’t want to continue to return to Congress every few years to ask for the program to be extended.

“What we want is the market to drop its costs down long term,” she said, adding that individual and small group markets for health insurance could see premiums increase by as much as 13 percent in the coming years. In the meantime, she and others are spending a lot of time waiting to see what the Department of Health and Human Services will do as the rulemaking process for the health law begins to gain momentum.

Some small business owners are already happily planning on taking advantage of the law. Jim Houser, an auto mechanic and owner of a shop in Portland, Ore., said in a telephone interview that the tax credits will save him nearly $15,000 a year in health care coverage costs. He provides coverage to 13 employees at his shop. Houser, who is a member of the Main Street Alliance – a small business group that supports the new law – said he’ll use the extra money he keeps from the tax credits to give raises to his workers that he’s put off for the last couple years. And in 2014, he’ll use health insurance exchanges to seek coverage for employees, he said.

“I never met a small business owner who turned their nose up at six years of small business tax credits,” said John Arensmeyer, founder and CEO of the Small Business Majority. The group supported health reform, and Arensmeyer said small businesses will for the first time be able to compete with large ones in terms of the type of health coverage they offer. Right now, he said, small businesses pay 18 percent more on average than large businesses in health care costs.

This is one of KHN’s “Short Takes” – brief items in the news. For more, check out KHN’s News Section, which includes summaries of news coverage and original stories.

Related Topics

Cost and Quality Insurance The Health Law