The New York Times brought attention nationally to an issue that has been debated in the nonprofit community for weeks: the idea that the comprehensive health care bill passed would provide financial support for small businesses that provide health insurance to their employees but deny the same benefit to small nonprofits.
Among the three comprehensive health care bills being proposed in Congress, all three seek to provide financial incentive for small businesses to continue to provide their employees with insurance. However, the crux of the issue is whether that support will be in the form of a tax credit or a subsidy. In the House version of health care reform, any small business that provides insurance to its employees and has fewer than 25 employees and an average salary of less than $40,000 would be eligible to receive a tax credit based on size and level of insurance provided. However, this excludes nonprofits (and unprofitable for-profits) from receiving this support, as nonprofits do not pay income taxes. The Senate Finance framework released last week seems to adopt the House language, but legislative language is forthcoming.
Conversely, the Senate HELP Committee bill expands the definition of small business and provides support for a small employer regardless of tax status. The bill says that any company with 50 or fewer employees with an average salary of under $50,000 that provides insurance through a health care “Exchange” would receive a direct sliding-scale subsidy to help with health care payments. The subsidy would come from the Department of Health and Human Services but be limited to only three consecutive years.
Proponents of a subsidy for all small employers (including Independent Sector, the National Council of Nonprofits, and ASAE) have argued that the HELP language is one solution to consider among a few. Another idea is a transferable credit approach, in that if a small employer provides insurance to its employees, a subsidy would be provided to the insurer which the insurer would use as an amount to reduce the premiums for that employer. A third option is to apply the credit to a tax that nonprofits do pay, such as payroll taxes.
Do you think small nonprofits should receive some kind of subsidy for providing insurance, and if so, how?
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