How many small businesses will learn to love Obamacare?
By Matt Hrodey
Just how many small businesses in Wisconsin will benefit from tax credits created in the new federal health reform package? Estimates from as few as 29,944 to as many as 86,100. Either way, it adds up to a lot of state businesses that will be claiming tax credits.
The larger of the two estimates comes from Families USA and the Small Business Majority, both national groups with liberal leanings. The former is a nonprofit health care group that promoted federal health care reform, and the latter is a small business organization. In a joint statement, they say that almost 87 percent of Wisconsin businesses with fewer than 25 employees could qualify for the new tax credits. That comes out to 86,100 businesses.
But the more conservative National Federation of Independent Business, a small business group that largely opposed the health care package, calls that estimate “factually baseless.” Never has the phrase “We’re from Washington, and we’re here to help,” it sniffs, “had a more hollow ring.” The group estimates the number of Wisconsin small business qualifying for the credits at just 29,944.
Why the huge difference in the estimates? To receive the credits, a company must have fewer than 25 full time employees (with part time employees adding up to count as full time equivalent employees) and average wages of less than $50,000 a year. The business must also offer its employees health insurance and pay at least half of its cost to qualify.
The liberal groups’ estimate assumes that every small business, driven by the new incentives, will begin offering health insurance and paying at least half the premium, and thus about 86,100 small Wisconsin businesses would get the tax credits.
The NFIB is less gung-ho and calculates its estimate using the status quo, the number of small businesses in the state currently offering health insurance and paying at least 50 percent of the premium. Its projections don’t factor in any increases in coverage by small businesses due to the incentives. The business group finds that just 29,944 small businesses would qualify.
“The truth is less than one-third of firms under 25 employees offer insurance, and the lower the average wage of a firm, the less likely it is to offer insurance,” scolds Bill Rys, an NFIB attorney specializing in tax issues.
If you split the difference between the two estimates, you get about 58,000 businesses that might benefit from the tax credits. Nationally, the U.S. Department of Health and Human Services is estimating the tax credits will total about $40 billion over the next decade.
Details on health insurance credits for small businesses:
The first round of tax credits for small businesses is temporary. It begins this year and ends in 2013. In the first round, there are two levels of tax credits.
The smallest goes to businesses with between 10 and 25 employees and average wages between $25,000 and $50,000 a year. In this group, the employer is credited with 25 percent of what it’s paying toward its employees’ health insurance premiums.
The largest credit goes to businesses with up to 10 employees and average wages up to $25,000 a year. In this group, the employer is credited with 35 percent of what it’s paying into the premiums.
The second round begins in 2014 and continues indefinitely. The two categories are then eliminated in favor of a single one.
All businesses with 25 or fewer employees and average wages of $50,000 or less will be credited with 50 percent of what they’re paying on their employees’ health insurance premiums – if they buy the health plans on a government-regulated insurance exchange.