Tax credit will help small businesses with health insurance costs
WASHINGTON – More than 4 million mom and pop restaurants, hardware stores and other struggling small businesses will be eligible for a tax credit this year to help buy health insurance for their workers.
The tax credit is expected to benefit nearly 84 percent of the nation's 4.8 million businesses that employ fewer than 25 people, according to a report released Wednesday by Families USA, a national health care consumer organization.
The tax credits will be available annually to employers with fewer than 25 workers through 2013 under the Patient Protection and Affordable Care Act.
In 2014, tax credits of up to 50 percent will kick in.
For this tax year, nearly 1.2 million small businesses in the U.S. – the smallest firms paying the lowest wages – will be eligible for the maximum credit of 35 percent, according to Families USA.
In Illinois, the organization projected, 203,600 small businesses, or 78.5 percent, will qualify for a tax credit.
Families USA Deputy Director Kathleen Stoll said most of the nation's smallest employers would like to offer health benefits for their workers but simply can't afford it.
In 2008, employers with fewer than 10 workers paid $350 more for each employee's health coverage than those with 50 or more workers did, her organization found.
Last year, only 46 percent of firms with three to nine workers offered coverage to their employees. Among businesses employing 10-24 people, the coverage offer rate jumped to 72 percent, and 95 percent of businesses with 50 or more employees offered coverage.
John Arensmeyer, founder and CEO of Small Business Majority, a national advocacy and resource organization for small businesses, said health care costs are "absolutely the biggest issue" voiced by small businesses.
Starting with the 2010 tax year, businesses with below 25 employees and average wages less than $50,000 can receive a tax credit of up to 35 percent on the average cost of a small group plan in their state. Non-profit organizations are eligible for a 25 percent tax credit.
To qualify for the credit, employers must cover at least half of each employee's health insurance premium.
In 2014, when state health insurance exchanges for small businesses and individuals become operational, small businesses will be eligible for tax credits of up to 50 percent and non-profit organizations will be eligible for 35 percent tax credits.
State health insurance exchanges will be market places in which small employers will be able to shop around for the best insurance plans and enroll in coverage.
Health plans selling coverage to these exchanges will have to meet consumer protection and quality standards, and those imposing unreasonable rate hikes won't be allowed into the competition, according to Families USA.
Stoll said state insurance exchanges will give small businesses the ability to come together to gain economy of scale.
"That's something large employers have now, and this will level the playing field," she said.
Small Business Majority has an online calculator for small businesses to calculate the amount of their health insurance tax credit at: http://smallbusinessmajority.org/tax-credit-calculator/.