Health care tax credits pique businesses' interest
Photo/Rebecca Goldfine
Janine Kerr, general manager of Maine Beer & Beverage, is one of a handful of employees benefiting from small business health care tax credits
Last year, Maine Beer & Beverage Co., a specialty beverage and small grocery store in the Portland Public Market House, offered health insurance to three of its longtime employees for the first time in four years.
But then sales slumped as the recession dragged on, bringing businesses along in its wake. Though owners Bill Milliken and Andrew Braceras saw their sales drop by half, they did not cancel their employees' policies. The owners decided to keep the insurance plans in part because of the new federal tax credits they expect to receive, which are part of the health care reform legislation signed into law last year.
"We're continuing to struggle financially," Milliken says. "But the tax credits at this point are one of the reasons we're not shutting off health insurance. As much as you might consider health insurance a right, when you're a business person, and your sales are dropping because of bad times, you have to cut. Instead, we got rid of health insurance for ourselves."
The Small Business Health Care Tax Credits are part of the politically divisive 2010 Affordable Care Act, which the House of Representatives just voted to repeal, mostly a symbolic act because the Democrats still have a veto-proof majority in the Senate. And a Florida federal judge recently ruled on a lawsuit filed by 26 states, Maine included, calling the law unconstitutional and saying it should be voided.
While there are other far more disputed sections of the law, the tax credits are not as controversial. They are designed for small businesses and nonprofits that employ 25 or fewer full-time employees who earn average annual wages below $50,000. "It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers," the IRS writes in its guidelines.
The credits can cover up to 35% of the insurance premiums an employer pays, a percentage that will increase to 50% for for-profit companies in 2014. Businesses can use the credit for up to six years.
Milliken is paying 100% of his three workers' premiums at $300 a month each, and he's receiving the maximum 35% credit. "We put two on [the policy] and got one for free," he says. "If you want to give your long-serving employees health insurance, this tax credit is huge."
Nationally, the Council of Economic Advisors estimates that 4 million small businesses are eligible for the credits. In Maine, up to 35,000 businesses potentially qualify, according to Maine Revenue Services.
It is too early to know definitively how the tax credits have affected the marketplace in Maine. Insurers say, while they have seen many businesses show interest in the tax credit, they are not sure yet of its impact.
Karynlee Harrington, executive director of the Dirigo Health Agency, says since her agency reopened its DirigoChoice health insurance program again in August, after capping enrollment back in 2007, 76% of its growth has come from small employers. The program currently covers just under 600 small businesses of two to 50 employees. "Intuitively, I think maybe there is a connection but I have no data that supports that," she says.
Anthem Blue Cross and Blue Shield has 50,000 small group members in Maine, many of whom are looking at whether they qualify for the tax credit, or even assessing what they can do differently to become eligible, according to Eric Jermyn, the director of small group sales at Anthem in South Portland. But he says there has not been a spike in new members. "We're not seeing a lot of groups that didn't offer it now offering it as a result of the credit."
He has heard of companies examining whether they can afford to alter their current plans and make the minimum contribution -- paying at least half of their workers' insurance premiums -- to gain the credit, Jermyn says.
Back at Maine Beer & Beverage, Janine Kerr, the store's general manager, says she always knew her bosses would give her insurance when they could afford it. But during the years she went without, the 32-year-old wound up in the emergency room twice after neglecting to take care of her asthma condition because her medicines were so expensive.
Milliken and Braceras also own Market Coffee House, on the second floor of the public market house. Between the two companies, they have about nine employees, and make an average annual net margin of between $10,000 and $20,000.
Even now, with the tax credits, Milliken says providing insurance for three of his employees is precarious. "From a philosophical standpoint it is the right thing to do, and makes business sense because everyone has worked here for a long time," he says. "But if things don't turn around [with the economy], the health insurance will have to go."
Despite foregoing health insurance for years, Kerr says she is happy at her job. "I prefer to work at a little place like this one that is so less corporate," she says, comparing her current position to a previous job at Whole Foods in Boston. "It's different benefits that you get."
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