NCPA - National Center for Policy Analysis


June 10, 2010

Rather than champion ObamaCare, many small businesses have expressed skepticism or outright opposition to the new law, contending that its provisions are insufficient in the face of sudden rate hikes and have created additional challenges, says California Healthline. 

The law's intended benefits: 

  • Beyond general measures intended to benefit all employers -- such as provisions designed to reduce health costs and expand health coverage for low-income workers -- the reform law targets small businesses with new tax credits and special protections.
  • Beginning this year, small businesses that employ fewer than 25 full-time workers and meet certain criteria will be eligible for a 35 percent federal credit on premiums.
  • According to the Council of Economic Advisors, about four million small businesses nationwide could qualify for the tax credit, which would be phased out by 2016.
  • Meanwhile, small businesses with fewer than 50 full-time employees would be exempt from new coverage mandates after new health exchanges come online in 2014, in hopes of reducing their health spending and improving competitiveness. 

As conceived, the reform law could have a considerably positive impact on California employers, says California Healthline: 

  • About 43 percent of the state's uninsured residents work for businesses with fewer than 10 employees, and more than 4.5 million Californians in 2007 worked for companies with fewer than 50 employees.
  • The tax credits could be worth more than $4.4 billion to California employers over 10 years, according to a report from the University of California, Berkeley's Center for Labor Research and Education. 

In practice, the credits are presenting unanticipated challenges, says California Healthline: 

  • For instance, small businesses are not permitted to count any family members they employ toward the credits.
  • Also, the National Center for Policy Analysis suggests that the credit could have an adverse effect on hiring practices, as the credit's value diminishes as small employers grow from 13 to 25 employees.
  • John C. Goodman, President, CEO and the Kellye Wright Fellow of NCPA cautions that a new tax on health insurers under the law will be passed onto small businesses and their employees in the form of higher rates. 

Meanwhile, many small business owners say any relief from the credits pales in light of rising health costs, as payers across the nation push for premium hikes. 

Source: Dan Diamond, "Why Small Businesses Aren't Embracing Reform," California Healthline, June 9, 2010. 

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