Nine of 10 small businesses in Pennsylvania will be eligible for tax credits this year under the new health-care reform law, and nearly one in four will qualify for the maximum 35 percent credit.

The tax credit can be as high as 35 percent of the employer's costs, and up to 25 percent for nonprofits, for businesses with 10 or fewer employees and an average wage below $25,000, according to a report released Tuesday.

Businesses must cover at least 50 percent of employees' premiums to be eligible.

The exact percentage of the tax credit decreases on a sliding scale, based on employee numbers and average salary figures.

The report was put together by consumer health care advocacy group Families USA, and Small Business Majority, a small business research and advocacy organization.

Health care "is the single biggest issue facing small business," said John Arensmeyer, founder and CEO of Small Business Majority. "Businesses are just getting killed by health-care costs."

His organization's website, www.smallbusinessmajority.org, has a health-care tax credit calculator for business owners to find out what their tax credit would be.

The new health reform law allows small businesses - those with fewer than 25 workers and average wages under $50,000 - to earn a tax credit if they provide health insurance to their employees.

The tax credit maximum will increase from 35 percent to 50 percent in 2014.

The report cited studies showing that, in 2009, only 46 percent of businesses with between three and nine employees offered health coverage for their workers.

For businesses with 10 to 24 employees, the rate was 72 percent, and more than 95 percent of businesses with 50 or more workers offered health insurance to their employees.

Citing a 2008 report by the Agency for Healthcare Research and Quality, the Families USA report said the smallest businesses - those with fewer than 10 workers - paid an average of $350 more per employee than the largest firms for health insurance, often for policies offering less coverage.

Because of their smaller number of employees, small businesses are at a disadvantage in negotiating insurance rates.

"They don't have the economies of scale that larger businesses do," said Ron Pollack, executive director for Families USA. "They don't have the bargaining leverage with insurance companies to get premiums at an affordable price."

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