A GOP House member slammed the Affordable Care Act’s (ACA) small employer health tax credit for underperforming ahead of ACA’s sixth anniversary.
The small employer health credit was designed to allow small companies with 25 employees or less to claim a credit for a portion of their contributions toward employee heath insurance through 2014. But the incentive was claimed by just 181,000 employers in 2014 – far less than the 1.4 million to four million estimated to be eligible by the Government Accountability Office (GAO) in 2012.
“Like so many other parts of Obamacare, this was another case of over-promise and under-deliver,” Rep. [crscore]Tim Huelskamp[/crscore], the chairman of the House Small Business Subcommittee on Economic Growth, Tax and Capital Access, said in his opening statement. “Multiple assessments, both during initial implementation and now today, years down the road, have made it abundantly clear – the credit scheme is so cumbersome and poorly designed that it is largely ineffective.”
The GAO said the credit failed for a number of reason, one being it wasn’t large enough to provide an incentive for businesses to provide insurance, especially with so few employers being eligible for the maximum amount.
“The credit can only be claimed for two consecutive years, and the cost and complexity involved in filing a claim in the first place is a significant deterrent,” James McTigue, director of strategic issues for the GAO, said during his testimony. He added that 86 percent of eligible employer didn’t offer coverage in 2013. “The effort required to gather information on the amount of time each employee has worked is extensive; spending at least three-to-five hours calculating the credit is not uncommon.”
Harold Jackson, executive chairman of Buffalo Supply, a small business in Lafayette, Colo., told the committee the massive hike in costs under ACA has caused him to reconsider the health coverage he offers employees.
“Most tax credits are designed to change behavior; Our company had always provided health-care insurance, but because of the increase in premiums, we may not be able to continue to do so due to escalating costs.” he said. “Because we are ineligible, this tax credit does not help me in any way to provide affordable health coverage to my employees now. And unfortunately, it will not encourage me to do so in the future – if and when – I may be forced to stop offering insurance because of prohibitively escalating costs.”
Holly Wade, director of research and policy analysis for the National Federation of Independent Business Research Foundation, noted to receive the credit employers had to go through the small business health options programs (SHOP).
“Only 13 percent visited their SHOP exchange, and only 1 percent actually purchased a plan through SHOP because they were often too expensive,” she said.
According to a survey by the National Small Business Association, just 2 percent of those using SHOP has a positive experience while 4 percent said they had a good experience with the small business health care tax credits.
Ellyse Elmer contributed to this report.
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