Expert: Tax credit won't get small businesses to offer health insurance
While more than 95,000 small employers in New Jersey are eligible to receive a tax credit from the Affordable Care Act to offset the cost of their workers' health insurance, according to a report, an employment expert said the credit will not increase small businesses' participation in providing insurance.
Small businesses with fewer than 25 full-time workers and average wages of less than $50,000 must cover at least 50 percent of each employee's health insurance premiums to qualify for the tax credit — which covers up to 35 percent of costs of the insurance they provide to their workers, increasing to 50 percent in 2014.
According to the report, released today by Small Business Majority and Families USA, of the state's 146,700 small businesses, 95,470 — or 65 percent — are eligible for a tax credit, and 36,680 of those employers could receive the maximum 35 percent credit. With 545,600 people employed by eligible companies in New Jersey, the state's small businesses will receive a combined $485 million subsidy, at an average of $889 per worker.
Ron Pollack, executive director of Families USA, said the small-business tax credit program "now makes it possible for small business to compete with large employers," noting that, in 2011, 71 percent of the U.S. companies employing 10 to 24 workers offered coverage, while 99 percent of businesses of 200 or more employees offered coverage.
"We know that small businesses want to offer their employees coverage, but many of them can't afford it," said John Arensmeyer, CEO of Small Business Majority, in a statement. "The tax credits will make it easier for small businesses to offer coverage, which makes their businesses more competitive and boosts their ability to create jobs and drive economic growth."
But John Sarno, president and general counsel of the Employers Association of New Jersey, said the tax credit will not push more small employers to offer health insurance to their workers.
"The eligible small employers … that do not currently offer insurance have various reasons for not doing so, mostly cost and the nature of the employees being part time, temporary or seasonal," Sarno said in an e-mail. "I do not think that these employers will offer insurance because of the tax credit … it won't have much of an impact."
According to Sarno, one upside to the small-business tax credit program will be making the state's health insurance exchange program more viable, since the Affordable Care Act's "individual mandate, and the subsidy that goes with it, will create an incentive for some smaller employers that are currently offering insurance to discontinue doing so," he said in the e-mail.
While the tax credit will cover up to 35 percent of a small employer's health insurance costs, Sarno said individual coverage under the mandate amounts to a 100 percent subsidy, since workers employed by an eligible small business will be covered through the insurance exchange at no cost to the employer.