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Too soon to measure law’s impact on small business

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Craig Bacheler is able to offer the employees at his small IT firm health benefits because of a new state law, but some who helped push for the law say it is too early to measure its benefits.

Small companies, those with 24 or fewer employees, can deduct 150 percent of the money they spend on health insurance premiums from their state taxes, and their employees can do the same. The legislation took effect Jan. 1.

For years, it was the top legislative priority of business groups like the Business Council of Alabama and the Alabama Chapter of the National Federation of Independent Businesses.

Bacheler’s firm, Bacheler Technologies, is among the smallest of small businesses. It employs just three people, but he said it needed to remain competitive to get the best workers.

Still, health insurance is expensive for a small company, and he found it difficult to justify the cost.

“It was a hard decision for me to make,” he said. “It was one of those things I needed to compete.”

The prospect of saving money when he files his business tax return with the state next year helped tilt the scale in favor of offering the benefit, he said.

Bacheler said it wasn’t the only factor, but he said the new law certainly made a difference.

“That tax break pushed me to justify it as an expense,” he said.

Rosemary Elebash, state NFIB director, said some firms are offering insurance as a result of the new law, but said she was unsure of an exact number.

Firms that previously offered insurance also get the break.

It will be difficult for any firm to know the exact amount it saves under the law until it files a tax return because it comes as a deduction, not a tax credit. That also means that firms will have to pay full price for the health insurance up front and not receive any benefit until next tax season.

“There is no way of knowing that until the end of the year,” Elebash said when asked how much money small businesses might save under the new law.

Bacheler said the cash flow issues will be manageable.

“It is just a monthly thing we pay,” he said.

According to Elebash, the amount small businesses pay for insurance could be one reason that more firms have not taken advantage of the new rules.

“We just heard from our members that rates are going up,” she said. “They are on just so tight of a budget. A lot of businesses got significant increases in premiums beginning July 1.”

She acknowledged that her group and others used the promise of expanded health care benefits as one of the main selling points in trying to get the legislation passed. Now that it has been law for more than a year and effective for almost eight months, she was unable to name any members of her group that have added coverage.

“Nobody has said that to me,” she said when asked if any small businesses have added the benefit.

Elebash said the rising unemployment rate and a deep recession could be other reasons that more small businesses and employees are not taking advantage of the law.

Matt Hall, who operates Dry Cleaning Express, was part of a push for the bill when it was in the Legislature, but he said its impact on his employees has been minimal.

“They still think it is too expensive,” he said when asked why more workers are not taking advantage of the deal.

“Most of them don’t itemize on their taxes anyway, so it doesn’t matter to them.”

He said about five of his firm’s workers have insurance through the company, and he estimated his savings would be a few thousand dollars.

State Rep. Jay Love, who pushed for the law, said it was too soon to measure its impact accurately.

“I think you need at least five years to see its full effect,” he said.

Still, he said it remains a useful law for small companies.

“I think any time you can help small business owners and employees, that is a good thing,” he said. “It is a tool that will help. It does make it less expensive.”

Love also pointed to the soft economy as reducing the law’s impact and said it was never a solution to the entire health insurance cost issue.

© 2009 Associated Press. Displayed by permission. All rights reserved.

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