Saturday, January 22, 2011

According to Dallas Morning News, the Great Obama Healthcare Compromise is failing on mainstreet with small businesses in Texas....

WASHINGTON — Pushing back against Republican efforts to repeal the health care law, the Obama administration has highlighted one of the law’s most business-friendly provisions: a tax credit that reduces the cost of health insurance for small employers.

Small Business Administration chief Karen Mills said this week that the percentage of employers offering insurance rose last year, thanks in part to the tax credit. Democrats said that repeal, which passed the GOP-controlled House on Wednesday, would result in a tax increase for small businesses claiming the credit.

Getting more small businesses to offer health benefits is key to expanding coverage in Texas, where 49 percent of small-business workers don’t have access to insurance, according to the Texas Department of Insurance. Those workers are most likely to labor in the food service and wholesale industries, according to the Insurance Department’s 2009 survey of small businesses.

The U.S. Treasury Department says 293,000 small firms in Texas were informed last year that they could qualify for the tax credit.

Administration officials say there is evidence that the credit prompted some to start offering insurance.

“There is story after story about people signing up for the tax credit,” Mills said. “As small businesses have understood the facts, they have gone into the marketplace and looked at the potential for them to take on health insurance if they don’t have it.”

The health law requires large employers to provide health coverage for workers or pay a fine. But it exempts small businesses with fewer than 50 employees.

The Kaiser Family Foundation, which tracks the prevalence of employer-sponsored coverage, said in December that the percentage of small firms offering health insurance rose in 2010 from 46 percent to 59 percent.

At the same time, the foundation’s report raised doubts about the cause of that increase.

Its authors said it seemed unlikely that many firms began offering insurance in a weak economy.

“While we have the statistics showing a statistically significant increase, we don’t have any analysis explaining the tax credit had anything to do with it,” said Rep. Michael Burgess, R-Lewisville.

The Internal Revenue Service says it’s too early to know how many employers will claim the credit for 2010. A recent study by the Lewin Group estimated that 81 percent of Texas’ small employers would qualify for some level of credit.

Yet the credit hasn’t been embraced by the small-business lobby. The National Federation of Independent Business says many of its members think the tax credit is too complicated to be useful. The federation supports the GOP repeal effort, which the Senate doesn’t plan to consider.

Complicated credit

The tax credit, which was available for the 2010 tax year, covers up to 35 percent of an employer’s premium costs for small firms that pay for most of their workers’ health costs. The full credit is available to firms with 10 or fewer workers and average wages below $25,000.

The credit declines if a firm has more than 10 but fewer than 25 workers and if average wages are higher than $25,000 but less than $50,000.

“Any kind of tax incentive is going to have to be far less complicated,” said Bill Rys, tax counsel at NFIB. “That is why we think this is no panacea for small businesses to solve their problems relative to health insurance.”

Most small employers in Texas that don’t offer insurance say it’s because coverage is simply too expensive, according to the Insurance Department’s survey.

Restaurateurs speak

Eva Taylor-Jones, owner of two Eva’s House of BBQ restaurants in southern Dallas, said it would be a “stretch” to provide insurance even with the tax credit. She can’t afford insurance for her workers, but would like to provide it, she said.

“If I had to do so, the economy definitely would have to be in a recession-proof environment,” said Taylor-Jones. She said she supported the health law.

“In the past it’s been so intimidating for small businesses and individuals to purchase because it’s been so astronomical in price,” she said.

David Carles, who opened a restaurant in Denton in 2009 with his wife, faces a similar problem. Carles said he’d like to eventually provide health insurance for his workers, but his young business is still unprofitable and coverage is too costly.

“It would just be one more liability that we couldn’t afford,” said Carles, who co-owns Cafe Du Luxe, a bistro. “We don’t even carry workers’ comp insurance. I have had to pay health claims out of pocket.”

Thomas George, president of an employee and executive benefits firm in Dallas, said he’s noticed no effect on the number of small firms offering insurance since the law passed.

He said many employers would hesitate to add insurance because the incentive doesn’t cover the entire cost of premiums.

“In this economy, when companies are struggling, they are loathe to add any expense, tax credit or not,” said George, president of George, Belcher, Evans & Wilmer.

Democrats say the credit is helpful but acknowledge that it isn’t a cure-all. Boosting the incentive is unlikely, given the pressure on Congress to cut the deficit.

“Since the Republicans are not willing to pay for anything except by cutting back on other health benefits, it probably is not possible in this environment to make it more generous,” said Rep. Lloyd Doggett, D-Austin.

Congressional Republicans say the tax credit isn’t the health law’s main flaw, but they argue that it’s not meaningful to small businesses. House Republicans say they’re working on new policies designed to lower the cost of insurance for small employers.

The GOP has promoted many of the ideas for years, including new restrictions on medical lawsuits and allowing insurance companies to sell policies across state lines.

Republicans also want to gut some of the regulations that stipulate what health care must be covered. Insurers say those requirements will drive up the cost of coverage, particularly on small employers.

“While tax credits are important to help small businesses afford coverage, other provisions in the new law are going to significantly increase the cost of coverage, including new taxes on small-business health insurance and minimum benefit levels that will require businesses to buy more coverage than they have today,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a lobbying group.

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