Small businesses like 'Little Chocolatiers' test out health care tax breaks

SALT LAKE CITY — Steve Hatch and Katie Masterson know and kind of like the notion that the success or failure of the first phase of the new federal health care reform package is hinging on small-business owners like them.

Businesses with 50 or fewer full-time employees — the husband/wife co-owners of Hatch Family Chocolates in the Avenues have eight to 10 part-time workers — are targeted for some serious tax exemptions between now and 2014 under the behemoth, 10-year reform plan.

The couple would jump at the tax break if they could, but because of the current proclivities of the U.S. health insurance industry — the main target of the reform — that deem the couple's dwarfism lifelong pre-existing conditions, employees can't come close to affording the premiums of being in their boss' insurance pool. The couple pay $925 a month for coverage.

"I wish we could take advantage of what are some very significant tax breaks right now, both for the company's sake but especially for the employees," Masterson said. "We're like most small business owners who view their employees like family members you want to compensate as best you can."

If the uptick in the economy continues, and as other reforms provide new or expanded options to uninsured working Americans, "we might get there sooner than we think," Hatch said, adding that he is convinced that targeting small businesses that can't afford to offer insurance plans or are dropping them because premium prices are heading nowhere but up is a wise first step to improving the system.

"Literally starting small puts reforms where they are needed most," Hatch said. "And starting there will amount to a road test for more comprehensive changes coming over the next eight years. Like it or not, it's at least a step toward dealing with the most serious financial problem facing any business, small or large."

In this first stage of business exemptions, employers can receive a credit of up to 35 percent of their contribution toward the costs of providing health insurance to their employees as long as they contribute at least 50 percent of the total premium cost.

The law gives the biggest subsidy to the smallest employers — those with 10 or fewer employees, said Korey Capozza, a health care policy analyst with the advocacy group Voices for Utah Children.

The amount of the credit phases out as firm size and average wage increases. In 2014, the subsidy jumps to 50 percent of the employer's contribution. The tax credit is available to any given employer for a period of two years.