Small Businesses Skip the Health-Care Tax Credit

Insurance brokers cite low response because the value of the benefit recedes quickly as average employee salaries exceed $25,000.

August 31, 2010

NEW YORK - While the Obama Administration has provided a tax credit of as much as 35 percent of the insurance premiums companies pay for employee health care insurance, many are finding that they do not qualify, and thus are finding it difficult to pay or continue paying for full employee coverage, Bloomberg reports.

Companies whose average employee wage exceeds $25,000 lose part of the credit, and those whose average wage exceeds $50,000 are not eligible for any savings. And with rising health-care premiums, small business owners are facing difficult decisions.

James Stenger, director of business development for BenefitMall, which sells group health plans, said most of his clients pay their workers more than $25,000 a year. As a result, the average tax credit they would receive is only about 10 percent of each policy's cost. That results in less than $200 per worker, hardly enough to spur companies to begin providing coverage.

"[The legislation] is just not doing what we had hoped," said Steven Selinsky, the incoming president of the National Association of Health Underwriters.

Countering those concerns, U.S. Small Business Administration chief Karen Mills said tax credit complaints are premature. "This is all still in anecdote land," Mills said, adding that the income cap was necessary to ensure those people with the greatest need were assisted.

"[Companies] want to provide health insurance [because] they're losing good employees when they don't," Mills said. "The math says [the program] is likely to be positive."

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