Small businesses continue to shun health exchange

Rebecca Askew hopes her investment in health insurance for her employees from the small business exchange pays off. Askew won’t know until her accountant completes her 2014 taxes if the tax credit will benefit her bottom line, as the federal government promised.

“I’m hoping the tax breaks will be good,” said Askew, owner of Circuit Media LLC in Denver. “I know I can get up to 50 percent; I’m hopeful that whatever percentage I get, it’s going to be better than what I was getting.”

Askew is one of few businesses that have taken advantage of the tax credit. Her experience underscores the difficult choices small-business owners make when faced with what kind of insurance to provide, or whether to offer any coverage at all to their employees.

Many business owners have shunned the Small Business Health Options Program, Colorado’s small-business exchange where employers can shop and purchase coverage as well as access a tax credit from the federal government if they meet certain requirements. Some have sent their employees to the individual insurance exchange while others have bought insurance through brokers.

Colorado’s health-insurance exchange, Connect for Health Colorado, has seen flat growth in the number of small businesses that have signed up. The exchange had about 300 employers that signed up to cover about 2,500 employees in November, said Luke Clarke, spokesman for the Denver-based organization.

The exchange reported about the same number of employers after the first six months of its operation in June. Unlike the individual exchange, small-business owners can enroll employees at any time.

National surveys suggest that most employers do not even know about state small-business exchanges, said Tim Gaudette, western outreach manager for Small Business Majority, a business advocacy group with an office in Denver. Only 31 percent of small-business owners are aware of the exchange, while just 43 percent know that they can receive a tax credit if they buy insurance on the exchange for their employees.

From 2010 to 2013, small businesses with 25 or fewer employees could qualify for as much as a 35 percent tax credit for health-care expenses, including vision, dental, health care and long-term care, Gaudette said. Employers can claim that credit retroactively, although many businesses have not taken advantage of that.

“It’s something that isn’t well known,” he said. “We try and tell people about it as much as we can.”

The government, however, raised the tax credit for the 2014 and 2015 tax years.

Small businesses can now claim the credit for as much as 50 percent of their health-care expenses. Businesses with 25 or fewer full-time equivalent employees with an average annual wage of no more than $50,000 qualify for the credit. Businesses must contribute at least 50 percent to their employees’ premiums. To earn the maximum 50-percent credit, businesses must have 10 or fewer employees with an average wage of no more than $25,000.

“The conundrum there,” Gaudette said, “is that you may not have as sophisticated a business to know about this credit, and take advantage of this credit.”

Gaudette would like to see the government raise the full-time equivalent employee number to 50 so that more businesses could qualify for the credit. Businesses must have from two to 50 full-time equivalent employees to buy insurance from the exchange.

Despite the complications of the credit, businesses would do well to consider the power of insurance to attract and retain good employees, he said. A small business could easily spend more on training a failed employee than it spends on health care for a better employee who would stay longer.

Not everyone thinks the tax credit or shopping on the small-business exchange is worth the trouble.

Scott Rankin, owner and agent at Leading Edge Financial Group in Greeley, criticized the tax credit because it applies only to coverage purchased through the small-business exchange. Other agents at his insurance firm will help businesses buy coverage through the exchange, but he has chosen not to do so personally because he believes he can offer people more options outside the exchange.

As for the tax credit, small businesses may need an accountant to figure out the intricacies.

“Qualifying for the credit appears to be sort of cumbersome,” he said. “You’re probably spending some money on an accountant to do these calculations; most small employers don’t have that staff.”

Fortunately for Askew, she employs an accountant.

Despite the complication of the tax credit and hassle of the exchange, Askew eventually found that the exchange offered her employees more plan choices than her former insurer offered. The small business exchange plans also had lower deductibles than previous plans offered by her insurer.

“Last year, my staff had 47 plans to choose from,” she said. Under her previous coverage scheme, “typically, I would give them one.”

Even if the tax credit does not boost her bottom line, Askew knows she is doing the right thing when it comes to insurance. Providing insurance is ethical and helps with employee recruitment and retention, she said.

“I pay for employees’ health care and I always have, even when it wasn’t a tax savings,” she said. But, “It’s nice to receive those incentives because it allowed us to continue to offer that.”

Steve Lynn can be reached at 970-232-3147, 303-630-1968 or slynn@bizwestmedia.com. Follow him on Twitter at @SteveLynnBW.

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