Even as a new study detailed the availability of health insurance tax credits for small businesses in Connecticut and elsewhere, insurance carriers and brokers say they are talking up the credits as the fall marketing season approaches in advance of health plans that go into effect in January.
The federal Patient Protection and Affordable Care Act allows small businesses to take a tax credit against their income tax bill covering up to 35 percent of the costs they pay for their workers”™ health insurance.
In Connecticut, the average premium is just below $13,500 for family coverage in the small group market; in New York it approaches $12,900.
In Connecticut, 77 percent of small businesses would qualify for the tax credit according to a report published by Families USA and Small Business Majority, using research from the Lewin Group of Falls Church, Va. Connecticut had the second-lowest percentage of qualifying businesses among states nationwide after Massachusetts.
The full tax credit is reserved for companies with fewer than 10 employees and average wages below $25,000; a partial credit is available for businesses with up to 24 employees and average pay of up to $50,000. The credit can be applied both to regular health plans as well as some specialized plans, such as dental or vision coverage.
Employers must pay for at least half the cost of health care for their workers to qualify.
Of 44,000 small businesses in Connecticut eligible to take the tax credit, nearly 13,000 of them would score the maximum credit allowed, according to Families USA and Small Business Majority. The latter organization has created an interactive tax credit calculator on its website at smallbusinessmajority.org, as have insurance carriers like UnitedHealth Group, the Minnesota-based parent company of Trumbull-based Oxford Health Plans.
“We are supporting our clients with ways to calculate those credits,” said Gail Boudreaux, president of UnitedHealth Group, in a July conference call with investors. “We think that there”™s an opportunity to help them in this marketplace, so we”™re working with small employers across the board for them to take advantage of that where it”™s appropriate ”¦ I think it”™s too early to tell what the uptick will be, but certainly we think it”™s an opportunity.”
While 4 million companies nationally are eligible for the tax credit, only about half of that number will actually cash in on the incentive, according to an analyst with the National Federation of Independent Business.
“Will a temporary credit help some of the smallest, lowest-wage businesses? Sure,” said Bill Rys, NFIB tax counsel, in a prepared statement. “Is it the ”˜saving grace”™ it”™s being made out to be? Probably not ”“ the minimal benefits of this tax credit are easily outweighed by the new and expensive burdens of this law.”
Passed in March, the tax credit is retroactive to the start of 2010; in 2014, employers will be able to take a credit covering half of the premiums they pay. Companies can claim the credit for the tax years 2010 through 2013, and any two years of their choosing after that for a total of six years.
Nonprofits can take a 25 percent tax credit this year, an amount that increases to 35 percent in 2014.
Small businesses cannot include equity partners and shareholders in calculating their employee count, nor family members of a business owner. Companies can include part-time employees in the equation, if their combined hours add up to that of a full-time worker. Seasonal employees who work fewer than 120 days in the year do not qualify.
Small businesses that pay estimated taxes can factor the tax credit into their calculations.
