Do small businesses in your area know about tax credit for offering coverage?

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Joanne Kenen, (@JoanneKenen) the health editor at Politico, has been AHCJ’s topic leader on health reform and curated related material at Follow her on Facebook.

There’s been a fair amount of coverage about the lower-than-expected enrollment in high-risk pools created by the federal health reform law. Another available benefit – a tax cut for certain small businesses that offer coverage to workers – is also eliciting less of a response so far than the White House had anticipated.

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Joanne KenenJoanne Kenen (@JoanneKenen) is AHCJ’s health reform topic leader. She is writing blog posts, tip sheets, articles and gathering resources to help our members cover the complex implementation of health reform. If you have questions or suggestions for future resources on the topic, please send them to

The tax credit hasn’t gotten a whole lot of attention, but an uptake update was tucked away in that annual Kaiser Family Foundation report on employer health benefits. The overall report got a lot of front-page press, but it’s worth taking a look at the small business tax credit too (and h/t to my colleague Jason Millman at Politico).

The Affordable Care Act provides a temporary tax credit for small employers – defined as having 25 full-time workers or the equivalent – with average wages less than $50,000. But not many know about it, or that they may be eligible, according to the survey. The White House has estimated that up to 4 million small businesses may be eligible for credits, which are meant to defray part of the insurance costs

The survey found that 29 percent of firms with fewer than 50 employees that offer health coverage tried to find out if they were eligible, and 65 percent did not. Of small businesses that did not offer insurance, half said they were aware of the tax credit and 48 percent said they did not know about it. Of those that were aware, only 13 percent said the availability of a credit had not led them to consider whether to start offering insurance to their workers

The tax credit can cover up to 35 percent of premiums. It rises in 2014 for two years for businesses buying coverage for workers through the insurance exchanges. To qualify, the business has to pay at least half the worker’s premium. Remember these smaller, lower-paying firms do NOT have to cover their workers, although the tax credit and some exchange features aim to encourage them to cover workers. Only larger employers have to contribute or pay a fee.

This is a pretty easy story to localize. How are businesses in your areas learning about the credit – or why aren’t they hearing about it? Perhaps more interesting – are they hearing misinformation? If so what’s the source of that?

The IRS says it’s working on improving outreach via the tax software industry, insurance brokers, agents and carriers, accountants and the small-business community. Do you see any signs of such outreach in your community? How much confusion do you find – do small businesses think they will have the same obligations as large employers? Do they understand the role of exchanges in helping the small-business market?


  • More on the benefits of the Affordable Care Act for small business owners (PDF)
  • Right now, the Alliance for Health Reform has a video on its home page of Terry Gardner, a former small business owner in Alaska who is now with the advocacy group Small Business Majority, explaining the tax credit. The video is supported by the Robert Wood Johnson Foundation.
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