Nudging small business to provide health care, share of cost
Much of the landmark Affordable Care Act won’t kick in until 2014, but one big component starts this year: federal tax credits for small businesses that provide their employees health care. Mike Colias of Crain’s Chicago Business relays a report by the D.C-based Families USA that 159,900 companies in Illinois are eligible for a federal tax credit of up to 35 percent. In order to qualify, businesses must have fewer than 25 workers and cover at least half of their employees’ health insurance. Generally, the smaller the business, the larger the tax credit, with companies employing less than 10 workers eligible for the 35 percent break.
Families USA reports that nationally, 46 percent of businesses with fewer than 10 workers provide their employees health care, while more than 95 percent of businesses with more than 50 workers offer health insurance. Liberals and conservatives both love to discuss the virtues of small business, evoking images of trustworthy hardware store owners and folksy diners. But so far, it has been big businesses that have the money and incentives to give employees basic health care.
The policy success of this tax credit then rests on whether it will spur more small businesses to provide health insurance. Reducing government revenue simply to help small businesses isn’t enough if the hardware store owner on the corner doesn’t start giving her employees health care.