Most Small Business Owners Have At Least Heard Of The ACA’s Small Business Tax Credit

The majority of small business owners are aware of the small employer health care tax credit created by the Patient Protection and Affordable Care Act (ACA), according to recent research from Mathematica Policy Research and the Robert Wood Johnson Foundation (RWJF). Small businesses are eligible to claim the ACA’s small employer health care tax credit if it makes nonelective contributions that pay for at least one-half of the cost of health insurance premiums for the coverage of its participating employees. In the Small Business Health Insurance Survey, Mathematica and RWJF surveyed employers with three to 100 employees in five states (Alabama, Colorado, Minnesota, New York, and Oregon) to determine the early and likely future effects of the ACA on small businesses.

The report, Small Businesses and Health Reform: Results From a Survey of Five States, found that small employers in Minnesota that offered health insurance to workers were significantly more likely to be at least slightly aware of the small employer health tax credit, compared with those that did not offer insurance. Of employers that were aware of the tax credit, those in Alabama were much more likely to say they would apply for the tax credit in the future than those in Minnesota and Oregon, the report found.

Employers not familiar with the tax credit were asked if they were likely to apply for the credit in the future. The survey found that in general, employers currently offering coverage said they were likely to apply for the tax credit after learning of it, particularly in Alabama, Minnesota, and Oregon. For employers not currently offering coverage, three out of four small employers responded that being eligible for the small business health care tax credit made them more likely to provide health benefits in the future.

SHOP exchanges. Compared with the tax credit, awareness of the SHOP marketplaces was low; in all states except Minnesota, less than half of employers were familiar with SHOP exchanges, the study found. When asked whether they would take part in the SHOP in their state and whether the SHOP would motivate them to provide health benefits, small businesses in Colorado and New York were more likely to say they would participate, compared with Alabama and Minnesota. In Alabama, Colorado, and New York, businesses that did not offer health insurance were more likely than those that offered coverage to say that the SHOP would increase the likelihood that they will offer coverage in the future.

Increasing coverage. Increasing the percentage of small businesses that offer coverage is one of the aims of the ACA. Mathematica and RWJF found that the percentage of small employers offering health coverage increased with firm size. In all five states, about half of the smallest firms (those with three to nine employees) offered coverage, compared with more than 90 percent of those with 50 to 100 employees. For those not offering coverage, cost was the major barrier to offering health coverage: in every state, the most important reason for not offering coverage was that the business could not afford it, the study found. Several ACA provisions are designed to address the cost concerns of small business, such as the small employer tax credit and the availability of SHOP exchanges, noted Mathematica/RWJF.

For more information, visit http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2014/rwjf412363.

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