Health beat: Can a tax credit expand coverage?

  • Article by: DAVE HAGE , Star Tribune
  • Updated: May 10, 2012 - 6:47 PM

At her little family freight company in Waterloo, Iowa, ReShonda Young has been offering health insurance to employees for years. She considers it part of being a good employer and a way to retain talented staff.

By last year, however, the relentless rise in premiums was causing her to reconsider. Then she discovered a tiny provision in President Obama's 2010 health law giving small employers a tax credit for up to 35 percent of their premiums.

"It's saved us thousands of dollars," she said. "That's money we can put back into new vehicles and updating our fleet."

A study released this week found that two-thirds of Minnesota's small employers -- nearly 66,000 companies with 340,000 employees -- are eligible for the same tax credit.

But so far the take-up rate among small businesses nationally has been modest. The White House says about 360,000 employers took the credit last year, of more than 3 million that were eligible.

Their participation is crucial: Most Americans get their health insurance through work, and a sharp drop in employer coverage over the past decade helps explain a sharp rise in the number of uninsured people.

Many small employers say the new tax credit, perhaps $800 per worker, just isn't big enough to offset the huge cost of buying health insurance.

"They're grateful for any additional dollars," said Scott Manion, a partner at the Twin Cities accounting firm Boulay, Heutmaker, Zibell & Co., who said most of his small-business clients already offer health insurance. "But it's really not driving their business decisions."

John Arensmeyer has a different theory: Busy entrepreneurs just haven't heard about the credit. Arensmeyer is CEO of a group called Small Business Majority, which supports the health-care law and sponsored this week's study with Families USA, another health advocacy group. He surveyed his members and found that 57 weren't aware of the tax credit.

"They want to offer health coverage, and yet 86 percent say the reason they don't is cost," he said. "These tax credits will go right at that issue."

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