An Obamacare remedy for some (but not all) small businesses without exchange access


In Maryland, small business owners without access to Healthcare.gov will not get any help from the latest tweak to the health care law’s rules. (Andrew Harrer/Bloomberg)
December 31, 2013

The Obama administration has introduced another temporary fix for the troubled rollout of the health care law, granting special access to tax breaks for some — but not all — small firms that are not served by the new government-run health insurance marketplace.

Treasury Department officials recently announced that tax credits available to firms that buy coverage through the government’s new health care exchanges will also be made available to employers who buy insurance through the private market, but only in certain counties of Wisconsin and Washington state, where not a single insurance company elected to sell small-business plans through Healthcare.gov.

Meanwhile, in states like Maryland, where the new small-business exchanges have attracted insurance providers but the Web sites themselves have not yet opened for business, small firms cannot yet receive subsidies to help them pay for coverage.

During the past three years, the tax credits in question have been available to firms with no more than 25 workers that offered health care to their workers, and the subsidy was worth up to 35 percent of the cost of coverage. Starting in January, it will expand to cover as much as 50 percent, as long as it is applied to plans purchased on the new state-run marketplaces or the federal exchange.

However, the change was going to leave out employers in five counties of Wisconsin and all but two of the 39 counties in Washington, where no insurers signed up to sell small-business plans through the new federal marketplace. Several lawmakers from those states argued it was unfair to strip firms of tax breaks simply because the government’s new shopping service did not attract enough interest from insurance carriers.

Now, thanks to the tweak, employers in those counties who offer plans that meet certain minimum-coverage standards will be allowed to take advantage of the tax credit next year.

Mark Mazur, assistant secretary for tax policy at the Treasury Department, noted that the small-business tax breaks are one of the key provisions of the law intended to curb rising health costs for employers. In a statement, he explained that “this transitional policy will ensure that small businesses in parts of Washington State and Wisconsin can take advantage of tax credits available under the Affordable Care Act.”

However, businesses in those states were not only ones the affected by the change.

In Maryland, small business owners are still waiting for health officials to open the state’s new employer exchange, which was originally scheduled to launch (with all others) in October. Last month, state officials pushed the anticipated start date back to April for plans that will take effect, at the earliest, in June. Officials say they are prioritizing the state’s individual exchange over the small-business portal.

Until then, Maryland employers are left with the same private insurance market they have been using for decades, and they cannot yet purchase plans that qualify for the credits.

The Maryland Health Connection Web site makes that clear, stating that “the health care tax credits and deductions are available only if you get coverage” through the small business marketplace. Later, even if employers purchase a plan though the exchange once it opens, the credit will only apply to the portion of the year for which the company held that new plan.

It is the same story in Idaho, Oregon and Mississippi. None of those states have launched a functioning small business exchange, and because each is building its own site, it is unclear whether employers will be able to access the full federal tax credit next year.

Meanwhile, even in states where small-business plans are currently available through the new federal marketplace, some employers are not pleased they must switch to plans sold through the exchange in order to qualify for tax credits they have been using since 2010.

David Glazier says his firm, Fleet Transportation in Arlington, Va., has taken advantage of the small-business tax breaks the past three years and he had hoped to continue doing so in 2014. So, he created an account and logged into Healthcare.gov to see what type of plans would be available to his small car service company.

So far, he says, it appears it would be even more expensive to switch to plans offered on Healthcare.gov, even with the tax breaks. He has decided to switch to a new, slightly less expensive plan on private market, but by doing so, he will not get any help paying for it.

“It doesn’t make sense,” Glazier said. “We’re trying to do the right thing by offering good health care to our employees. It doesn’t make any sense that we will no longer be eligible for those credits even if we continue to offer a plan like the one we have now.”

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog. Before arriving in 2011, J.D. covered innovation and technology for Portfolio in New York City. He has a master’s in journalism from Columbia University and a bachelor’s degree from Wake Forest University (Go Deacs).
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