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Health care tax credit a mystery for many small businesses

COAST CITIES — Many small businesses qualify for a tax credit for providing health insurance to employees. 

But 50 percent of small businesses in California that are eligible are unaware of the Small Business Health Care Tax Credit, according to a new report issued by the Small Business Majority, a nonprofit and bipartisan organization.

The report is based on two statewide-listening tours, one of which stopped in San Diego and was conducted by a panel of experts and the Small Business Majority. During the listening tours, organizers took feedback from small business owners and educated them about the ACA (Affordable Care Act.)

“The affordable health care act is a massive, sweeping piece of legislation,” said David Chase, director of outreach for the Small Business Majority. “There’s a lot of partisan rhetoric and misinformation clouding the legislation. Small business owners don’t care about that. They really just want to know if it will cut costs and help them.”

Many of the reforms that are part of the new health care law have directly impacted California’s 700,000 small businesses.

Yet Chase said outreach efforts revealed that a good portion of business owners know little about the ACA.

Chiefly, many small businesses owners did not know about a health care tax credit that’s been in place for nearly two years.

The majority of small businesses in California meet the salary and full-time employee requirements necessary to receive the tax credit, according to the Small Business Majority’s analysis. Of those that had heard of the tax credit, many weren’t taking advantage of it because they weren’t sure if they’re eligible, how to apply for credits and how to calculate the number of full-time equivalent employees, the report said.

“It’s understandable — a lot of small businesses are too busy or don’t have an HR department,” Chase said. “The administrative work can be overwhelming.”

Elisabeth Mack, regional sales manager of small group sales for Anthem Blue Cross in San Diego County, said many small businesses could benefit from the tax cut and should look into it. But she said some haven’t used it because they’re budget neutral or in the red.

“To pay taxes, you need to be profitable,” Mack said. “The tax credit is deducted from profits.”

The number of small businesses offering health insurance in San Diego has greatly declined over the last several years, according to Mack.

“A lot of small businesses just can’t afford health care right now,” she said.

Mack said a health care-related tax credit may be more effective if it focused on giving small businesses who provide health insurance a break on sales or payroll taxes.

At the listening tours, Chase noted that affordability was business owners’ biggest health insurance-related concern. The Small Business Majority believes the ACA is a step in the right direction. It should bend the cost curve downward for small businesses, according to the organization’s analysis. Without it, health care costs for small businesses would have more than doubled by 2018, according to their report.

Another popular topic: Many small employers had questions or expressed interest in California’s health benefit exchange, a key part of health care reform that goes into effect in 2014. The benefit exchange creates a virtual marketplace where individuals and small businesses can buy insurance, often that’s federally subsidized.

Some small business owners had misconceptions about the new health care legislation, according to Chase. Most notably, many mistakenly believe that the ACA will require them to provide health insurance. When in fact, most small businesses will not be subject to the penalty for not offering insurance, Chase said.

While many are still confused about the ACA, Chase noted progress has been made. He said business owners weren’t as receptive to learning about the new legislation two years ago, when controversy surrounding it reached a fever pitch.

“Present day, there’s a thirst to get beyond the politics,” Chase said. “To learn more and move forward.”

Still, he believes further outreach is critical.

Chase said small businesses with questions about tax-cut eligibility, the state’s health benefit exchange and more should visit

And for further information, a third listening tour may stop in San Diego this year, he said.