Most Oklahoma employers exempt from health-care act tax provisions
BY WAYNE GREENE World Senior Writer
Wednesday, July 04, 2012
7/04/12 at 7:28 AM
Read the Tulsa World continuing coverage of the health care law.
The vast majority of Oklahoma employers will be exempt from the tax provisions of the Affordable Care Act, according to state statistics.
Starting in 2014, the federal law will tax employers who don't provide qualified health insurance to their employees, but employers with fewer than 50 workers are exempt from the tax.
Oklahoma Employment Security Commission statistics for the fourth quarter of 2011 show that 87,895 establishments had 49 or fewer employees. That's 94.5 percent of the state's employers, according to the commission.
Some 644,098 people work for the small employers - 42.1 percent of the average annual work force, the commission reports.
Although small employers are exempt from the tax penalties for not providing health insurance, some of them are eligible for tax benefits if they do provide health insurance.
Companies with up to 25 workers and average annual wages below $50,000 qualify for a tax credit of up to 35 percent if they give their workers qualified health insurance benefits. In 2014, the tax credit goes up to 50 percent.
Small employers are exempt from the insurance mandate, but their employees are not.
Starting in 2014, Americans will have to report on their tax returns if they have qualified health insurance, according to the Commonwealth Fund. If they don't, they have to pay $95 or 1 percent of their taxable income, whichever is higher. In 2015, the tax rises to $325 or 2 percent of taxable income. In 2016, the tax rises again, to $695 or 2.5 percent of taxable income. The maximum penalty is $2,085 per family, and there are several exceptions to the tax.
That tax - the so-called individual mandate - puts small businesses in a tight spot, said Matt Robison, a lobbyist for the State Chamber of Oklahoma. Many small businesses don't offer health insurance benefits, but if their employees are compelled by tax laws to buy insurance - even if they don't think it's in their own economic best interest - there is pressure to either increase salaries or buy insurance, he said.
That reduces the company's profitability and its willingness to expand and puts them at a competitive disadvantage with international companies that don't have to comply with the U.S. law, he said.
The law also acts as an "invisible barrier" on expansion for companies as they get close to the 50-worker threshold, Robison said.
A 49-employee company might put off hiring more workers because it doesn't want to face the health insurance tax, he said.
Other employers are not hiring because they feel uncertain about what additional taxes might be necessary to pay for the health-care law.
"No question, there are employers holding back because of the uncertainty," Robison said.
Small businesses and the Affordable Care Act
Employers with fewer than 50 workers are exempt from employer responsibility taxes. They don't have to pay an assessment if their employees get tax credits through a health insurance exchange.
Companies with up to 25 employees and annual average wages below $50,000 who provide health insurance benefits qualify for a small business tax credit of up to 35 percent (up to 25 percent for nonprofits) to offset insurance costs.
Starting in 2014, the small business tax credit goes up to 50 percent (up to 35 percent for nonprofits) for qualifying businesses.
Employer-based plans that provide health insurance to retirees ages 55-64 can get financial help through the Early Retiree Reinsurance Program, which is designed to lower the cost of premiums for all employees and reduce employer health costs.
Starting in 2014, small businesses with generally fewer than 100 employees can shop in a health insurance exchange, which is designed to give small businesses the buying power of large businesses.
Source: HealthCare.gov (U.S. Department of Health and Human Services)
Original Print Headline: Few state employers subject to health tax
Wayne Greene 918-581-8308