Small-Business Premium Tax Credit

The ACA exempted employers with fewer than 50 employees from the employer mandate.6 To encourage these employers to buy insurance for their employees, the ACA offered firms with 25 or fewer employees (with an average income of $50,000 or less) a tax credit good for two years, equal to 50 percent of the premium. The employer would have had to pay the other half of the employees’ health insur- ance premiums and buy the insurance through an ACA small business exchange.

The premium tax credit was apparently an insufficient incentive for small employers to buy insurance for their employees. The administrative and financial burden imposed on them was too great. The ACA small business premium tax credit failed to decrease the number of uninsured employees by any appreciable amount.