HealthLawProf Blog

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Akron Univ. School of Law

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Monday, July 14, 2008

Obama Proposes Small Business Tax Credits for Health

Barack Obama proposes to give tax credits to small businesses that provide health insurance plans.  Small businesses would get a refundable credit of up to 50 percent on premiums paid on behalf of their employees, but will have to offer a quality health plan to all of their employees and cover a meaningful share of the cost of employee health premiums.  The Washington Post reports,

Barack_obamaDemocratic White House hopeful Barack Obama unveiled a proposal on Sunday to give $6 billion a year in tax credits to small businesses that provide health insurance plans.

In a speech to Latino voters of the National Council of La Raza in San Diego, Obama gave credit for the idea to Sen. Hillary Clinton, whom he defeated in a hard-fought primary for the Democratic nomination for November's election.

"Today, I'm announcing my plan to provide real relief for small business owners crushed by rising costs, an idea by the way that was championed by my friend Hillary Clinton, who's been leading the way in our battle to insure every American," Obama said.

A statement detailing the proposal said small businesses create, on average, more than 2/3 of net new jobs each year, but they pay on average 18 percent more for health premiums than their larger counterparts.

"They face unique challenges in providing health care to their employees, including higher administrative costs, lower bargaining power, greater price volatility and fewer pooling options," the statement said.

Under the plan, small businesses would get a refundable credit of up to 50 percent on premiums paid on behalf of their employees. To be eligible, small businesses will have to offer a quality health plan to all of their employees and cover a meaningful share of the cost of employee health premiums.

Obama's economic policy director Jason Furman said treasury officials would work out the exact details of what size firms would qualify and at what stage the credit would be phased out for medium-sized firms.

He said the cost would be covered by making so-called "biologic" drugs easier to bring to market in generic form, which would increase market competition and lower federal spending on prescription drugs which account for a growing share of the overall drug market.

It could also be covered by dedicating a portion of savings from reducing disproportionate share hospital (DSH) payments as already outlined in his healthcare proposals, the campaign said.

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