Will more small businesses be able to offer their workers health coverage under Obamacare? The legislation creates a tax credit to encourage just that. But a new report from The Commonwealth Fund says it probably won’t help much.
Though small firms eligible for some level of the tax credit employ approximately 16.6 million employees, the report estimates that businesses that might actually take advantage of the credit employ only 3.4 million workers. Moreover, a large portion of those 3.4 million already receive health insurance through their job.
The Washington Post’s N.C. Aizenman notes: “those firms that do not offer coverage are unlikely to consider the tax breaks enough of a financial incentive to start doing so.”
Understanding why isn’t hard. To qualify for the tax credits, a company must pay for at least 50 percent of their employees’ health insurance premiums. Companies with few employees and low payrolls receive the highest percentage of tax credits. The maximum credit amount is 35 percent of an employer’s contribution to premiums in 2010, and 50 percent starting in 2014. But the tax credits will stop entirely after 2016.
A tax credit that dries up in six years provides little incentive for employers to assume massive health costs.. And in a struggling economy, with employers looking to cut costs anywhere they can, the appeal diminishes even more.
Obamacare advertised small-business tax credits as the solution for employers unable to afford health coverage for their workers. But the meager, short-term tax advantages don’t outweigh the slew of new taxes, mandatory payments and other projected cost increases businesses face from the health care law.
This blog was co-authored by Charles Adair.