GAO: Tax credit in healthcare law underperforms

Tax credits in President Obama's healthcare law aren't big enough to prompt small businesses to start offering healthcare benefits, the Government Accountability Office said Monday.

Fewer businesses than expected have been taking the tax credit. 

ADVERTISEMENT
The Congressional Budget Office initially estimated that the credits would total $2 billion in 2010, but instead businesses only claimed $468 million, according to the GAO.

Similarly, a recent report from the advocacy group Families USA said that as many as 2.5 million businesses were eligible for the tax credit but failed to claim it.

GAO said it couldn't pin down the number of eligible businesses, but concluded interest has been limited in part because the credit is too small. It's not big enough to change the minds of companies that aren't offering healthcare coverage, GAO said, citing interviews with small businesses and insurance brokers.

Only about 17 percent of the businesses that would otherwise be eligible for the maximum tax credit offered health insurance, according to government data cited in the GAO report. The tax credits are administered on a sliding scale, covering up to 35 percent of a company's healthcare costs.

"While some small employers could be eligible for the credit if they began to offer health insurance, small business group representatives and discussion group participants told us that the credit may not offset costs enough to justify a new outlay for health insurance premiums," GAO said.

Sen. Orrin Hatch (R-Utah), the top Republican on the Senate Finance Committee, said it came as "no surprise" that the tax credit is difficult to claim.

“The failure of these small business tax credits goes to the heart of what’s wrong with ObamaCare: it’s confusing, expensive, and burdensome for the families and businesses that have to comply with it," Hatch said in a statement.

This story was updated at 3:58 p.m.