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Benn Ray, co-owner of Atomic Books and president of the Hampden Village Merchants Association, says he was unaware of the availability of a tax credit to help provide insurance for his employees. (The Daily Record/Maximilian Franz)

Insurance tax credits going unused?

Some small business owners say they’re unaware of program

Benn Ray is exactly the kind of person government officials had in mind when designing the small business premium tax credit, which he could apply toward his share of his employees’ health insurance premiums.

The owner of Atomic Books in Hampden is not only eager to provide health insurance, he meets the subsidy’s eligibility criteria: He employs fewer than 25 people and pays an average annual salary of less than $50,000.

But Ray hasn’t gotten the tax credit, and his six employees haven’t gotten employer-sponsored health insurance.

Why? Call it a breakdown in communication.

Ray, who is also president of the Hampden Village Merchants Association, wasn’t aware that those tax credits, which were created under the Affordable Care Act, became available for Maryland businesses on April 1.

Ray, like other business owners in the state, mistakenly thought the credits’ availability was tied to the launch of the Small Business Health Options Program, commonly called the SHOP exchange, which isn’t scheduled to go live in Maryland until 2015.

Due to the faulty technology behind Maryland Health Connection, state officials have delayed launching the SHOP exchange three times, but they announced in January that business owners could begin applying in April for SHOP health plans and tax credits by working with authorized brokers or the insurance companies directly.

Some business owners have already taken advantage of that option, called “SHOP Direct Enrollment,” but it’s not clear how many will end up receiving the tax credit.

As of May 9, 46 groups had submitted an application to state exchange officials to determine if they qualified as a small business that may purchase an exchange-certified SHOP plan, according to Alison Walker, a spokeswoman for the health exchange. That determination is based on the number of employees and their hours.

Exchange officials don’t know how many of those groups are eligible for tax credits — which vary in size depending on several factors — because their eligibility will be determined by the federal Internal Revenue Service when the group files its 2014 taxes early next year.

However, it’s reasonable to assume that a significant portion of the 46 applicants will receive some amount of tax credit because enrolling in a certified SHOP plan is the only way to get the credit. The credits cannot be applied toward non-SHOP plans.

Walker said data about enrollment in SHOP plans will become available over the summer. She said exchange officials consider the 46 applications “a good start, given the program recently launched.”

But Ray said many business owners didn’t get the memo.

“We do want to offer insurance to our employees, but we’ve had no idea what’s going on,” Ray said. “My understanding was that the small business side of things had been delayed, so I’ve been waiting for that to come around. I don’t think any of the small businesses here [in Hampden] are aware of this.”

Ray said now that he knows he may apply for coverage — and the associated tax credit — regardless of what’s going on with the SHOP exchange website.

“I still don’t really understand the difference between waiting for the [SHOP] exchange and now being able to enroll or apply for the tax credits outside the exchange,” he said.