The final section of this part of the PPACA is about the Small Business Tax Credit. One of the concerns of the current health care system is that small businesses don’t have a lot of opportunity or access to provide health care to their employees. While some small business workers can be covered on their spouse’s or partner’s insurance, many can’t, and this is part of the gap in coverage. PPACA to the rescue! Or at least to the something besides doing nothing!
Section 1421 provides a tax credit to small business for their portion of health insurance plans that they provide for their employees. As the number of employees goes up, or their wages do, the tax credit decreases. If you pay your employees $100,000 a year each, even if you only have a few of them, then presumably your business is doing well enough that you can pay for their health insurance as well. This credit is specifically for small business, both in size and value.
There are provisions for calculating full time equivalents from many part time employees, and if you, say, have one employee that you work 60-70 hours per week, you can’t claim them as multiple employees, only the first 2,080 hours count. Seasonal workers are not counted, if you own stock in the company, that doesn’t count, or if the worker is your dependent, that doesn’t count.
The tax credit replaces the tax deduction that currently exists for small business owners who pay for health insurance. In general, credits are better than deductions, so small business owners should have an incentive here to provide more health insurance benefits. We’ll see why this matters next week.
Because, that’s right kids, we’ve made it to the INDIVUDAL MANDATE portion of the PPACA. You’ll just have to wait through the weekend and you too can then decide if it is the best thing since sliced bread, or the work of the devil, or a compromise position intended to please few while placating many. Until then!