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Economic Growth:
Health Insurance Tax Incentives for Small Businesses and Their Workers

“There is perhaps no greater obstacle to a flourishing economy than the staggering cost of health care. As we grow our economy, we can increase the number of Alabamians with access to affordable health care by offering targeted tax incentives for small businesses and their workers.” -Governor Bob Riley
The rising cost of health care has put a financial strain on American families and on businesses that provide insurance to their workers. Many companies are finding it increasingly difficult to offer quality health care plans, while more and more employees decline coverage due to costly premiums. This problem stymies economic growth and causes many Alabamians to go uninsured.

Governor Riley’s proposed Health Insurance Tax Incentives for Small Businesses and Their Workers allows both owners and employees of small businesses to deduct twice the amount they pay in health insurance premiums from their state income taxes. These tax incentives will make it easier for companies to provide quality healthcare plans and more affordable for workers to receive coverage through their employer.

The proposed legislation applies to businesses with 25 or fewer employees, representing 90% of business in Alabama and one-fifth of the state’s work force. Qualifying employees must have adjusted gross income of less than $50,000.

Background

  • Alabama has the 3rd lowest percentage of uninsured in the southeast at 14.1% and is below the national average of 15.3%.
     
  • The U.S. health care system is based on employer-sponsored coverage. In Alabama, employers provide health insurance to almost 54% of the population. Those without health insurance through an employer are more likely to go uninsured, creating increased health care costs for the state because of the inevitable impact on state programs.
     
  • Statistics show that only 72% of workers in small business have employer-sponsored health insurance options compared to 99% in large companies.
     
  • In Alabama, 93% of privately insured individuals receive health care insurance through their employer, but as premiums escalate an increasing number of employees are declining to participate in health care programs.
     
  • A recent report found that 11% of small business owners who currently offer health insurance are considering dropping their benefit plans in the future because of the cost burden.
     
  • Back to Economic Growth

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