Obamacare achieving its goal, slowly but surely

Small business owners are optimistic about their future says a recently released Bank of America survey.  That’s the good news.  The bad news is that small business owners are concerned about losing qualified employees to larger businesses because of benefits. 

According to the survey 18% said that providing competitive healthcare and retirement benefits is their number 1 challenge to keeping good employees.  Yet only 44% of the small businesses offered benefit packages. 

The obvious reason for small business owners not to offer healthcare and retirement programs is cost.  Reducing the cost of health insurance for small businesses was our goal for supporting national healthcare reform.  One of the provisions in Obamacare (Affordable Care Act) to reduce the costs was the health insurance tax credits.

Businesses with fewer than 25 employees, average employee pay of less than $50,000 and the employer paying at least 50% of the premiums qualified for the tax credits.  In 2010, 228,000 small business owners claimed the tax credits (up to 35% of the premium paid by the employer) and the White House gives a low-ball estimate of 360,000 taking advantage of the tax credits in 2011.  The actual number for 2011 will end up much higher since small businesses often file for tax deadline extensions, amend their taxes later or take the credits in subsequent years. 

Should more small businesses be using the healthcare tax credits?  Of course.  There are millions of small businesses that are eligible as pointed out by the Government Accountability Office yesterday when it criticized the healthcare law saying the tax credits were too small to encourage employers to offer health insurance.

But the health care tax credits in Obamacare are only one of the features that will make small business health insurance more affordable.  There’s also the requirement that at least 85% of the premiums be used for medical costs or rebates are due.  Small business owners will receive $377 million in these rebates this year because of this medical loss ratio provision.

There are many other benefits for small businesses in Obamacare that will result in keeping down or reducing premiums which I outlined back in April in an opinion editorial in The Hill.

But the GAO report not surprisingly spawned attacks by Obmacare critics.  After the report was released, a joint statement by House Small Business Committee Chairman Sam Graves and Sen. Olympia Snowe said “the healthcare reform law is simply bad policy that is holding small businesses back and therefore should be repealed.”  The statement continued, “this GAO report confirms that many small firms haven’t claimed the tax credit because it is too complex and its temporary nature didn’t provide a significant solution to their long term compliance problems — a regrettable, but all too foreseeable conclusion.”

Senator Orrin Hatch also jumped on calling Obamacare, “confusing, expensive, and burdensome for the families and businesses that have to comply with it.”

But the GAO report said that the tax credits are too small, not that they were confusing, complex, temporary, burdensome or holding anyone back.  The critics are making those complaints up. 

My CPA told me that the tax credits are actually much easier to calculate than other government tax credit programs.  And the healthcare tax credits certainly aren’t a burden or expensive for small businesses whether they use them or not. 

What the GAO report actually means is that the tax credits should be higher in order to encourage more small businesses to offer healthcare.  But one thing cannot be denied.  These tax credits under Obamacare have in fact already made health insurance more affordable for hundreds of thousands of small businesses.  That was the goal. 

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