Entrepreneurs May Receive Tax Credits For Using MNsure

The smallest of Minnesota businesses—those with fewer than 25 full-time workers whose average salaries are under $50,000—may receive a tax credit for purchasing health insurance from the new exchange.

Tuesday marks the much-anticipated debut of MNsure, the state’s new health insurance exchange that was created in response to federal health reform.

Minnesotans can begin shopping on the marketplace for coverage that begins January 1, and while there have been plenty of concerns leading up to MNsure’s rollout, it’s designed to grant thousands of individuals and small businesses a new option for buying health insurance. (The site was reportedly expected to launch Tuesday afternoon, as its operators completed a “final check” of the system.)

And it’s the smallest of businesses that may be most incentivized to shop on the exchange, as they’re eligible to receive tax subsidies.

Large employers (those with 50 or more full-time or full-time equivalent employees) cannot buy plans on the exchange. And if a large employer offers its workers sufficient coverage, its employees are ineligible to receive subsidies when buying from MNsure, meaning they’re not expected to shop on the exchange either.

Employers with fewer than 50 full-time workers, however, can acquire plans from the exchange—and it’s the smallest companies that may be most likely to shop there.

Businesses with fewer than 25 full-time employees whose average salaries are under $50,000 can receive tax credits when buying through the exchange. In fact, they can receive a credit that covers up to 50 percent of premium costs, depending on their eligibility. That may encourage Minnesota entrepreneurs and start-ups to begin offering coverage to their small pool of employees.

To access a calculator that was designed to help small businesses determine whether they are eligible to receive a credit—and if so, how much—click here.

A similar tax credit is available to small businesses in 2013, but it maxes out at 35 percent of premiums paid for employees. For tax years beginning in 2014 or later, the maximum credit will increase to 50 percent of premiums paid and employers must buy plans from the exchange to be eligible.

But the long-term impact of the credit may be limited, as it will be available to eligible employers for only two consecutive taxable years.

Employers that have more than 25 employees but fewer than 50, meaning they’re still deemed “small” but are ineligible for a MNSure tax credit, and that already offer their workers coverage may maintain the status quo. They are “the most likely to continue offering coverage themselves and taking the existing tax deduction for the premiums they subsidize for their employees,” Julie Bunde, director of product management and product and market solutions at HealthPartners, recently told Twin Cities Business.

Such employers could also drop their coverage and allow their employees to procure their own individual plans from the exchange and potentially receive their own subsidies there.

Twin Cities Business Editor In Chief Dale Kurschner joined host Roshini Rajkumar on WCCO radio over the weekend to discuss the implications of MNsure for Minnesota’s businesses. For an audio recording of the conversation, click here.

Twin Cities Business is also in the midst of a four-part webinar and e-newsletter series that provides the information employers of all sizes need to know amid the rollout of health care reform. To view our first three webinars, input from industry experts, and in-depth stories about reform click here. (One such story recently focused on how employers of different sizes are weighing their options after the rollout of MNsure rates.)

To sign up for our October 23 webinar, click here.