By Rebecca Adams, CQ HealthBeat Associate Editor
February 16, 2012 -- White House officials recently highlighted a fiscal 2013 budget proposal to spend $14 billion over a decade to expand a health care tax credit for small businesses, a move they say would benefit about 4 million workers this year.
The proposal would simplify and build on a credit that was part of the 2010 health care law (PL 111-148, PL 111-152). In 2011, about 360,000 of the estimated 6 million small business employers in the United States are expected to benefit from the existing tax credit. That means about 2 million workers will be helped to get insurance, Karen Mills, head of the Small Business Administration, and Small Business Majority CEO John Arensmeyer noted on a phone call with reporters.
National Economic Council senior aide Liz Fowler told reporters that the administration has found offsets that could pay for the expansion. However, the proposal faces a skeptical Congress because it is unlikely that Republicans who want to cut the deficit will agree to spend more money to expand the health care law.
Even before the tax credit was enacted, critics argued that its rules would be too cumbersome and restrictive. The expanded version would simplify the rules and expand the credit, White House officials said. Businesses with up to 20 workers would be eligible for a full tax credit, instead of those with up to 10 workers under the current law. Companies with up to 50 workers would be eligible for a partial credit, instead of 25 workers under the current rules. The expanded version would also increase the average wages that a company's workers could earn.
The budget proposal would eliminate two requirements for employers to claim the credit. First, it would eschew a requirement that employers show they contribute the same share of the cost for each employee's health insurance. The proposal also would eliminate a cap that now limits employer contributions to the amount that an employer would have given if they offered the health insurance plan with the average premium in their state—a requirement that administration officials acknowledge can be complicated to calculate.
Employers would still be required to contribute at least half of the insurance premium, the requirement under the current version.
One challenge to the program's success is that "some businesses just didn't know about it," Jason Levitis, senior adviser to the assistant Treasury secretary for tax policy, said on the call with reporters. An administration supporter on the call, Michigan small-business owner Mark Hodesh, said that he had to ask his accountant about it more than once and nudge him to take advantage of it.
The IRS is in the midst of a "massive outreach campaign" to raise awareness of the credit, Levitis said. The administration has sent postcards and emails to accountants and small-business owners. IRS officials have spoken at an estimated 1,500 business forums around the country about it.
Administration officials may be hoping that efforts to publicize the credit and its proposed expansion will pay political dividends. Polls by the Kaiser Family Foundation and others have shown that when Americans learn about the tax credit, many support the concept of it.
One group that was not impressed was the National Federation of Independent Business (NFIB), which represents small-business owners. NFIB is one of the parties challenging the constitutionality of the health care law.
"The current health care tax credit is ineffective at incentivizing businesses to provide health insurance," said NFIB spokeswoman Jennifer Cooper. "Expanding it does not mean that more business owners will take advantage of it. The ineffectiveness of the credit comes down to one thing: The credit does not outweigh the cost of the many taxes in the health care law."
But the White House plans to continue to tout the proposal through activities by the Small Business Administration, IRS, and HHS throughout the year, with the aim of attracting notice particularly among political independents who may not have a deep understanding of the health care law.