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Harold Jackson has always taken pride in offering high quality, affordable health insurance to the employees at his 20-person medical supplies company in Lafayette, Colo. But it hasn’t been easy to keep that up in recent years.
Since Obamacare was passed in 2010, his small medical supply company’s premiums have shot up from an average of $12,840 for a family plan in 2010 to $16,380 this year, while the out-of-pocket-maximums and deductibles his employees are faced with have spiked, as well. During that same period, the level of benefits has diminished, meaning his company and his employees are paying more and more for less and less coverage.
But there was at least a silver lining in the law - an incentive, if you will, to encourage the smallest of small businesses (like Jackson’s) to continue offering health insurance to their employees, even when faced with rising costs and diminishing coverage. It’s known as the law’s Small Business Health Insurance Tax Credit, through which the authors of the law promised companies with fewer than 25 employees that the government would help foot the bill for small businesses that offered health plans to their workers, under certain circumstances.
Alas, another Obamacare promise broken.
“This tax credit does not help me in any way to provide affordable health coverage to my employees,” Jackson explained during a hearing held by the House Small Business Committee’s subpanel on economic growth, tax and capital access on Tuesday. “It will not encourage me to do so in the future if and when I may be forced to stop offering insurance because of prohibitively escalating costs.”
In short, the law’s small business tax credit was designed in such a way that makes it completely useless to most of the small businesses it was supposed to help, according to Jackson, who testified on behalf of the U.S. Chamber of Commerce. For starters, the application for the credit requires small firms to hand over a wealth of information that very few (if any) keep on hand about not only their employees but about employees’ spouses, as well – including their tobacco history and social security numbers.
“It took me two or three days to gather up this information,” Jackson said. “I spent about 10 hours entering this information into the system, after which I couldn’t figure out how to review the plans available or get quotes.”
Second, the tax credit is only available to small businesses that buy health plans through Obamacare’s new online insurance portals, known as SHOP exchanges. Only problem is, the SHOP exchange have been a technical disaster in many states, and some have garnered little traction with insurers. As a result, many brokers tell small business owners what Jackson heard from his: “I can get you a quote, but I don't want to go through the exchange; it’s too much hassle.”
And finally, there’s perhaps the most prohibitive component of all: the tax credit’s earnings cap. In order to apply for the tax break, that is, the company’s employees, including the owners, must not make on average more than $50,000 per year. That prevents many small businesses from taking advantage of the credit, despite having nothing to do with how expensive it is for the firm to afford health insurance.
Added Michael Ricco, another small business representative who testified before the panel on Tuesday: “We question the fairness of this cap because, in essence, it punishes our company for paying our employees a higher wage. This limitation, in our view, should be removed from the eligibility requirements of this tax credit.”
Combined, these barriers have prevented one the law’s few potential perks for small businesses from being of any use to an untold number of small businesses around the country. In fact, as few as 4.5 percent of eligible companies claimed the tax credit in 2014, according to government estimates.
On the day before the health care law’s sixth anniversary, Rep. Tim Huelskamp (R-Kan.) says the small business tax credit represents the latest in a long line of instances where the law “over-promised and under-delivered.”
“This credit proved to be complicated, confusing, and costly to implement,” said Huelskamp, the subcommittee's chairman. “It is yet another broken promise to the small business community.”
As the implementation of the health care law moves forward, it’s imperative that we identify and fix provisions like the small business tax credit that simply aren’t working. This includes eliminating other unworkable components like Obamacare’s Cadillac Tax, medical device tax, and health insurance tax, all of which will send health costs soaring ever higher for small companies and their employees.
If not, Jackson and other small business owners across the country will continue to find it more difficult to provide high-quality health care options to their workers.
“Providing health insurance to our workers… is part of our culture and important for attracting and maintaining the best employees,” Jackson said. “But, it hasn’t been easy. In fact, each year it gets harder and harder for us financially.”