Families USA Report Misleads on Obamacare’s “Help” for Small Businesses
The liberal advocacy group Families USA is out today with a new report claiming that 3.2 million small businesses are eligible for the new health insurance tax credit created by Obamacare. However, prior studies and claims – including reports from the Administration itself – demonstrate that Families USA’s “conclusions” vastly overstate Obamacare’s benefits for small businesses, while understating its drawbacks. Here’s what you need to know about the study, and the issue:
- Even the Administration admits take-up of the small business credit has been much lower than expected, and lower than today’s report claims. While today’s study claims that 3.2 million small businesses are eligible for the credit, a February Administration fact sheet conceded that only 360,000 firms will actually benefit from the credit in 2011. That’s only 11% of the number hyped in today’s report.
- The study omits many firms from its definition of “small business,” to make the credit seem more important than it is. The report admits that there are many ways to define small business. However, it then proceeds to use the narrow definition of small business included in Obamacare – firms with fewer than 25 employees. In other words, according to the study (and the law), a restaurant with 30 workers is NOT a small business, and does not need help funding its health insurance costs.
- The credit is administratively cumbersome and complex, leading many small businesses not to bother claiming it. For instance, small businesses have to fill out seven separate worksheets in order to receive the credit. Republicans have pointed out the credit’s administrative complexities since the law passed – and the low take-up rates for the credit are evidence of that fact.
- The credit provides little incentive for firms to start offering coverage – the credit’s benefits are time-limited, while the rising costs from offering coverage are permanent. While the credit will expire for most firms by 2016, firms who use the credit to start offering coverage will face higher costs over time. There are also premium increases for those small firms that do offer coverage; the law contains dozens of mandates to be implemented over the next several years, each of which could raise premium costs by 1-3 percent. An article in the New York Times last year highlighted the skyrocketing premium increases faced by small businesses, profiling small firms receiving premium increases of 20, 40, even 60 percent or more. According to a CBO analysis, the average tax credit would only cover about HALF of the cost of a 20 percent increase in premiums – meaning premium costs will STILL go up every year, even if a company qualified for the credit.
- Liberals are now trying to blame conservatives for the flaws in a tax credit they designed. The Families USA report includes a line claiming that “the current heated political debate about [Obamacare] has created additional barriers to effectively reaching [sic] America’s small business owners with the facts about this new tax credit.” However, the debate about Obamacare didn’t stop the Administration from spending nearly $1 million in taxpayer funds ($990,000, to be precise) to fund 4 million postcards promoting the tax credit – none of which helped improve enrollment, as noted above. The facts are that the poor design of the tax credit – like the poor design of the entire law – has led firms to reject this option, just as the American people continue to reject Obamacare.
Finally, it’s worth pointing out that today’s report was conducted for Families USA by the Lewin Group. The Huffington Post and other liberal allies called Lewin a front group for insurers back in 2009, when it released studies showing how a government-run health plan could cause millions to lose their health insurance. It will be worth watching to see whether the HuffPo and other liberal groups will similarly criticize today’s Families USA/Lewin study as being biased, when it helps trumpet the talking points of Obamacare supporters.