The small business health insurance tax credit, which was highly advertised by the administration as an incentive for small business owners to purchase group health insurance plans, has been largely ineffective, the National Federation of Independent Business explained during congressional testimony.
“The high cost of health insurance is the main reason why small business owners do not offer health insurance,” said NFIB Research Director Holly Wade. “For the same reason that no one buys a new car because of an air freshener, no one is buying very expensive health insurance because of a small, temporary, and hard-to-qualify-for tax credit.”
The small business health insurance tax credit was a targeted approach by the Obama administration to offset the high cost of health insurance for small employers. The problem, according to Wade, is that the universe of small businesses that can qualify is small and so is the actual financial benefit.
“The small business tax credit is a much better talking point than it is a financial incentive for small businesses,” Wade continued.
Wade will tell the Subcommittee on Economic Growth, Tax, and Capital Access that the ineffectiveness of the small business health insurance tax credit is due to four main factors. Those most eligible and the biggest beneficiaries are small businesses that are least likely to offer health insurance; it is exceedingly difficult to verify eligibility and claim the credit; the credit is temporary; and the credit it only available to qualifying businesses through the Small Business Health Options Program (SHOP) marketplace, which most small employers do not use.
“To date, the tax credit has a very limited impact. Very few small business owners can qualify and they must still take the time, or pay an accountant, to file for it,” Wade said. “This restrictive and complicated tax credit did not deliver as promised and is not the incentive supporters were looking for in driving small employers to the SHOP exchange.”
Today’s hearing will be at 10 A.M. in room 2360 of the Rayburn House Office Building.
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