Obama’s health care aid to small firms disappoints

In this 2008 photo, then-Republican Rep. can­di­date Sam Graves talks to a voter in Kear­ney, Mo. (Asso­ci­ated Press File | Char­lie Riedel)

RICARDO ALONSO-ZALDIVAR

Asso­ci­ated Press

WASHINGTON — It seemed like a good idea at the time.

But a health insur­ance tax credit for small busi­nesses, part of Pres­i­dent Barack Obama’s health care law that gets strong sup­port in pub­lic opin­ion polls, has turned out to be a disappointment.

Time-consuming to apply for and lack­ing enough finan­cial reward to make it attrac­tive, the credit was claimed by only 170,300 busi­nesses out of a pool of as many as 4 mil­lion poten­tially eli­gi­ble com­pa­nies in 2010.

That’s put the Obama admin­is­tra­tion in the awk­ward posi­tion of ask­ing Con­gress to help fix the prob­lems by allow­ing more busi­nesses to qual­ify and mak­ing it sim­pler to apply.

But Repub­li­cans who run the House say they want to repeal what they call “Oba­macare,” not change it.

“They com­pletely missed the tar­get on this thing,” Rep. Sam Graves, R-Mo., said of the tax credit. “I don’t think expand­ing it is going to make any dif­fer­ence what­so­ever.” Graves chairs the House Small Busi­ness Committee.

It doesn’t help the administration’s plea that the biggest small-business lob­by­ing group is a lead plain­tiff ask­ing the Supreme Court to over­turn the Afford­able Care Act. The National Fed­er­a­tion of Inde­pen­dent Busi­ness isn’t likely to spend much time tin­ker­ing with the tax credit or pro­mot­ing it to members.

Small busi­nesses rep­re­sent the crum­bling edge of the nation’s sys­tem of employer-based health care. Only about 30 per­cent of com­pa­nies with fewer than 10 work­ers offer health cov­er­age, and they often pay more for insur­ance than large busi­nesses. The credit, which once had sup­port in prin­ci­ple from law­mak­ers of both par­ties, was sup­posed to help busi­nesses already pro­vid­ing cov­er­age afford the pre­mi­ums. And maybe it would even entice some to start.

“We agree it is not a panacea for all costs,” said John Arens­meyer, founder of Small Busi­ness Major­ity, an advo­cacy group that sup­ports the health care law and dis­agrees with the much larger inde­pen­dent busi­ness fed­er­a­tion. The prob­lem is all the neg­a­tive pub­lic­ity around the health care law has dis­cour­aged busi­ness own­ers from apply­ing for the credit, he says.

“There has been more heat than light shone on this,” Arens­meyer said. “There is no rea­son why small busi­nesses shouldn’t be tak­ing advan­tage of this credit.” About 770,000 work­ers were cov­ered by the busi­nesses claim­ing the credit in 2010.

How­ever, a recent report by Con­gress’ non­par­ti­san Gov­ern­ment Account­abil­ity Office iden­ti­fied sev­eral issues with the credit itself.

To begin with, the GAO said, the tax credit is struc­tured so its biggest ben­e­fits go to very small com­pa­nies pay­ing low wages. About 4 out of 5 such busi­nesses don’t offer cov­er­age, and the tax credit is not suf­fi­cient to encour­age them to start doing so.

“Small employ­ers do not likely view the credit as a big enough incen­tive to begin offer­ing health insur­ance,” the report said.

The aver­age credit claimed in 2010 was about $2,700, although some com­pa­nies qual­i­fied for much more.

Many small firms did not qual­ify because they paid fairly decent wages. The GAO report quoted an uniden­ti­fied tax pre­parer who explained that “peo­ple get excited that they’re eli­gi­ble and then they do the cal­cu­la­tions and it’s like the bot­tom just falls out of it and it’s not really there.” It’s almost a bait and switch.

Com­plex­ity has been another obsta­cle. IRS Form 8941, which employ­ers must com­plete to claim the credit, has 25 lines and seven work­sheets, the GAO said. Some tax pre­par­ers told the agency it took clients from two to eight hours to pull together sup­port­ing infor­ma­tion and tax pro­fes­sion­als another three to five hours to cal­cu­late the credit.

Try­ing to help, the IRS iden­ti­fied “three sim­ple steps” employ­ers needed to fol­low, but the GAO found “the three steps become 15 cal­cu­la­tions, 11 of which are based on seven work­sheets, some of which request mul­ti­ple columns of information.”

Arens­meyer said claim­ing the credit will be sim­pler once it becomes stan­dard in tax-preparation software.

As it stands now, the credit is only tem­po­rary, expir­ing in 2016. That’s another rea­son Con­gress appears unlikely to adopt the administration’s pro­posed fixes, which would cost an esti­mated $14 bil­lion that has to be off­set with cuts elsewhere.

If the health care law with­stands Supreme Court scrutiny, more employ­ers could start claim­ing the credit. Oth­er­wise, it may just go down as a missed oppor­tu­nity, for pol­i­cy­mak­ers and small-business own­ers alike.

Posted by AP News on May 30 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.