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Report Shows Broad Eligibility of Health-Care Tax Credits for Local Small Businesses

Coverage is available to nearly 80 percent of all California businesses with 25 or fewer employees

Rep. Lois Capps, D-Santa Barbara, highlighted a new report Thursday showing that 456,500 California small businesses with fewer than 25 employees will be eligible for tax credits this year to help pay for health insurance coverage for their employees.

These new tax credits are part of the new health insurance reform law enacted earlier this year. The report Capps cited was jointly issued by the nonprofit, nonpartisan health care organization Families USA and the Small Business Majority, a small-business advocacy group. The report found that nearly 80 percent of all California small businesses with 25 or fewer employees are eligible for the tax credits.

Currently, most small businesses do not have the same access to affordable group rates that are available to large businesses, making it more difficult for them to provide their employees with health insurance. Nationally, only 46 percent of businesses that employed three to nine workers offered health coverage to its employees last year. Seventy-two percent of businesses with 10 to 24 employees offered coverage. On the other hand, nearly all businesses in California (95.4 percent) with more than 50 employees provided health insurance coverage.

“Over 450,000 small businesses in California are now eligible for the new health insurance tax credit. Businesses that already provide coverage will now be able to lower their costs. And the credits will help business owners who have wanted to provide coverage for their employees, but previously couldn’t afford it,” Capps said. “Making health insurance affordable for small businesses — the engine of our economy — will ensure the United States is able to compete in the 21st century economy. I encourage my constituents to go to my Web site to learn more about the tax credits.”

The report, “A Helping Hand for Small Business: Health Insurance Tax Credits,” also highlights the fact that 135,900 small businesses in California meet the requirements to receive the maximum tax credit of 35 percent. These businesses employ 10 or fewer workers who earn average wages of $25,000 or less.

“Many small businesses — like the local diner, the hardware store down the street or the neighborhood repair shop — face special challenges in providing health coverage for their small number of employees,” said Ron Pollack, executive director of Families USA. “They will now receive substantial help.

“For example, in 2008, employers with fewer than 10 workers had to pay, on average, nearly $350 more for each employee’s health insurance than firms with 50 or more workers. It’s no surprise, therefore, that less than half of these smallest businesses offered health coverage to their employees. This new tax credit should certainly help to improve that record.”

“There’s been a lot of speculation about how many small businesses will qualify for tax credits, and this report clears up a lot of those questions,” said John Arensmeyer, founder and CEO of Small Business Majority. “We now have real numbers that show the vast majority of small businesses in California will qualify for tax credits under the new law. That’s huge.”

The tax credits are just one of the many ways that health insurance reform helps small businesses. On July 1, the new consumer Web portal HealthCare.gov went live. It will empower small businesses with more information on health coverage options and help small businesses on the Central and South Coast easily identify affordable and comprehensive health-care coverage options available in their ZIP code. Additional features, including the ability to compare plan pricing information and benefit packages, will be added by October.

When the new state-based Health Exchanges are up and running in 2014, small businesses will have the same access to affordable group rates that large companies have today and will be able to choose from a wider selection of private plans.

— Ashley Schapitl is the press secretary for Rep. Lois Capps, D-Santa Barbara.


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