TAX NEWS - June 2010

Small Businesses Hit by Health Plan Hikes While Awaiting Tax Credits

Small businesses that qualify for tax credits under the new federal health reform law might not experience immediate benefits because of recent rate increases by insurance companies, the San Francisco Chronicle reports.

The article was supported by the California HealthCare Foundation Center for Health Reporting. CHCF is the publisher of California Healthline.

Tax Credits

The reform law offers tax credits to small businesses that:

- Have fewer than 25 full-time employees;
- Offer average annual salaries that are lower than $50,000; and
- Cover at least 50% of their workers' health plan costs.

Qualifying small businesses immediately can receive tax credits worth 35% of premium costs and will receive credits worth 50% starting in 2014.

In California, the tax breaks will total $4.4 billion, according to a study released in March by the University of California-Berkeley Center for Labor Research and Education. The study also found that companies with fewer than 50 workers employ about 44% of California's total uninsured working population.


Rate Increases

Recent health insurance rate hikes have led many California employers to stop providing coverage for their workers.

Insurers that have raised rates for small businesses this year include:

- Blue Shield of California, which raised rates by 58% to 75% for some plans;
- Aetna, which imposed a 25% increase for small business health savings account plans; and
- Anthem Blue Cross, which plans to raise rates by about 13% for small business plans.

Health Net and UnitedHealthcare did not provide information on rate changes for small businesses.