Small Business Healthcare Tax Credit

As of 2014, every individual must have health insurance or pay a tax penalty, and businesses with more than 50 employees must provide coverage or pay a fine. Businesses with fewer than 50 employees do not have to provide insurance for their employees, but if they do, they may qualify for a tax credit starting with the 2010 tax year. This health care tax credit is available to businesses currently offering coverage for their employees as well those providing coverage for the first time.

Kathleen Stoll, deputy executive director of Families USA, states that businesses with three to nine workers make up about 85 percent of small businesses nationwide. Less than 50 percent of these small businesses offer health coverage to employees. This bill is designed to encourage small employers to offer health insurance coverage.

Businesses may still qualify for the federal tax credit, even if they currently receive state health care tax credits. They are permitted to receive the credit not only for regular health insurance, but also for add-on dental and vision insurance.

The Congressional Budget Office (CBO) predicts that the tax credit will affect about 12% of individuals covered via the small group insurance market. Approximately, 3.6 million small businesses will qualify in 2010 for the tax credit.  In Missouri that’s about 79,000 businesses employing 303,406 people. The National Federation of Independent Business says the number is lower, with only two million of the nation’s six million businesses with employees able to qualify for the tax credit.

For tax years 2010 to 2013, the maximum credit is 35% of premiums paid by eligible small employers. A small business that receives the tax credit may deduct the amount of premiums for which they did not receive a tax credit. For example, a business that receives a 35% subsidy, they can deduct the remaining 65% of the premium costs. A study by the CBO states that the credit reaches its optimal point at 13 workers, with relief peaking at $36,400.

The credit is available for a maximum of six years. By no later than 2014, states will have to set up Small Business Health Options Programs or “SHOP Exchanges” where small businesses will be able to pool together to buy insurance. For the next four years, until the SHOP Exchanges are set up, businesses will be eligible for this tax credit. After the exchange is set up, the tax credit will remain in place, increasing to 50% of costs for the first two years a company buys insurance through the state exchange.

Who is eligible for the tax credit?

  1. Firms must have 10 or fewer employees to receive the full credit. For firms with 11-25 employees, the credit is reduced per employee. Firms with more than 25 employees get no credit.
  2. Firms that pay their workers less than $25,000 are eligible for the full credit. The credit is reduced as the average wage increases, stopping at $50,000.
  3. The employer must pay 50% or more of the insurance costs to be eligible.

How is the tax credit calculated?

STEP ONE: Determine the number of full time employees (FTEs), then divide the total hours for which you pay wages during the year (but not more than 2,080 hours for any employee) by 2,080. Round down to the next lowest whole number.  For example, if you have two half time employees, they would count as one full time employee.

1) A sole proprietor, a partner in a partnership, a shareholder owning more than two percent of an S Corporation, and any owner of more than five percent of other businesses are not considered employees for purposes of the credit.
2) A family member of any of the business owners or partners listed in number 1above, or a member of such a business owner’s or partner’s household, is not considered an employee for the purposes of the credit. A family member is defined as a child (or descendant of a child); a sibling or step-sibling, a parent (or ancestor of a parent); a step-parent; a niece or nephew; an aunt or uncle; or a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law.
3) Employees who are seasonal (less than 120 days of work) do not need to be counted.

Note: These individuals can apply for individual tax credits.

STEP TWO: Calculate the average annual wages of employees by taking the total annual wages paid to employees and dividing it by the number of full time employees from Step One. Round the result down to the nearest $1,000.

STEP THREE:  Fill in these amounts along with the amount of premiums paid in to a calculator such as one at to estimate your tax credit.

What are the requirements for the insurance provided?

The coverage cannot simply be catastrophic coverage. Coverage must meet a minimum actuarial value, which is the percentage of costs that the insurance plan pays when co-pays and deductibles are factored in. The minimum actuarial value for coverage must be 60%, which is typical for most insurance today.

Coverage must be affordable. The employee’s part of the premium cannot be more than 9.5% of their income. If the premium is more than this, the employee can go into the exchange and claim a tax credit to buy coverage.

Employers must offer coverage to the dependents of employees, but the employer is not required to pay for that additional coverage. If the employee receives coverage for the family or self-plus-one the employer can satisfy the 50% requirement if the total premium is at least as much as 50% of the cost of single coverage for that employee (even if it is less than 50% of the premium for the coverage the employee is actually receiving).

The amount of an employer’s premium payments that count for purposes of the credit is capped at $4,663, which is the average premium for the small group market in Missouri. Furthermore, any premiums paid through a salary reduction arrangement under a section 125 cafeteria plan are not treated as paid by the employer.

What do the critics of the tax credit say?

A study by the National Center for Policy Analysis shows that tax credits in the new law could negatively impact small business hiring decisions. If you do qualify for the tax credit, you’ll have to limit hiring and employee compensation to keep it. When business owners decide to hire an extra employee, they are not only going to be paying that worker’s salary, they are going to have to absorb the cost of losing the tax credit.

The credit is only temporary help,  available until 2016, two years after the healthcare exchanges are up and running. After that, a business and its workers must pick up the whole tab. The CBO predicts that in 2016, only 3 million of the 159 million Americans, who participate in an employer-sponsored health plan will be eligible for the tax credit provided to their employer.

The CBO estimates the credit will cost taxpayers $37 billion, and the self-employed are excluded from the credit, yet they represent 78% of all small businesses in the United States.  In addition, members of the business owner’s family are not eligible for the credit. For many small family businesses, this will dramatically decrease the available credit, especially since “family” includes children, parents, grandparents, siblings, aunts, uncles, in-laws, and others.

Where can I find more information?

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Optometry Giving Sight Gives the Gift of Vision

Making a donation in lieu of a traditional holiday present is becoming evermore popular.

Gifts that give something back and that can help transform a life are the perfect presents for those friends, family, customers and colleagues who have everything.

Optometry Giving Sight makes it possible for people to give the gift of vision this holiday season with its online Gift of Vision™ gift catalog.  It’s  full of opportunities to give in a way that transforms lives by addressing the needs of the millions of men, women and children who are blind or vision impaired simply because they do not have access to an eye exam and a pair of glasses.

Just $25 can provide an eye exam and pair of glasses for up to five people in countries with little or no access to quality vision care.

A simple pair of glasses can eliminate the cycle of poverty by enabling children to go to school and parents to provide for their families. There are gifts to suit all budgets from $25 to $1,200.

The Gift of Vision makes holiday gift shopping quick and easy with no waiting in lines or searching for a parking space.

  • First, go online to and choose your gift.
  • Then, write a personalized message for the card your friend, colleague or relative will receive, which includes details of their gift.
  • Optometry Giving Sight does the rest by sending the card.
  • We use your gift contribution to fund programs that deliver sustainable vision care services in the developing world.

The Gift of Vision is not just for holiday giving.   The organization features a wide selection of cards that allow you to give the gift of vision

  • for birthdays
  • for weddings
  • in memory of a loved one
  • for Mother’s/Father’s Day
  • for almost any occasion at all

Any time is the right time for a Gift of Vision!

Now is the Time: Review All Your Insurance Provider Agreements

Dr. Ryan Ames and Dr. Chuck Brownlow, PMI, LLC

October is a great time to launch your ‘annual’ review of all the agreements you’ve signed with HMOs, medical insurers, and vision plans. Most of the contracts will renew effective January 1, and many of them will automatically renew, at the current terms, unless you take action to negotiate or resign as a contracted provider. Many plans also invite you to submit your current fee schedule before the end of each year. If you don’t do that, you certainly shouldn’t wonder why the adjustments in the payers’ fee schedule don’t seem to move in concert with your own.

The review process provides several potential benefits to your practice:

  • First, in order to review the contracts, you have to be able to find them. Don’t be surprised if the search for some or all of the contracts comes up empty or if it takes much longer to locate the contracts than you expect. Doing this every year will mean that no contract will have been lost or misplaced for longer than twelve months. Finding the contracts, even if you don’t read them, will put you ahead of many of your colleagues in the race to be the ‘Best Optometric Business Person’ contest. Not much competition there, as we know.
  • Second, you’ll probably find that you are treated as a ‘contracted provider’ by some insurers that you don’t have a contract with. Blue Cross/Blue Shield and its offspring seem to be prone to paying doctors as contracted providers even though no signed contract exists. If you can’t find a contract for an insurer, contact the insurer’s provider relations department and get a copy. If they won’t give you one or say that you don’t need it, contact the Office of the Commissioner of Insurance, as this is probably a violation of the state’s insurance law.
  • Third, compare the fee schedule included in each insurer’s contract with your own fees to determine which you can afford to renew, which are so bad that you must cancel, and which are close enough to the limit of fees you can accept. Contact the insurers you wish to negotiate with and let them know that this year’s fees will not cut the mustard for 2011 and that you are prepared to negotiate.
    • Important note: Bluffing insurers doesn’t work…They’re better at it than you are. If you are not prepared to negotiate, don’t try it. Instead, contact your accountant or other consultant and ask for help to determine what fees you have to receive in order to realize net income from each patient. Chair cost analysis is the old stand by for initiating this process (a Chair Cost Calculator is available at the AOA website,, but your consultants should be able to come up with a more useful and more predictive process.
    • It may cost a few bucks, but if it identifies contracts that result in negative net income (which is pretty likely), leading you to eliminate them, it will be well worth it.
    • Remember that the money you spend to become more businesslike will yield benefits for years to come as you repeat this process every October!
  • Fourth, apply this process to every new contract that comes into your office and don’t sign or renew any contract that does not respect the value of your services, your scope of practice, and national rules for coding.