On October 7, 2015 President Obama signed the Protecting Affordable Coverage for Employees (PACE) Act that amends the Affordable Care Act (ACA) definition of a “small employer” for the purpose of purchasing health insurance coverage.
Prior to the signing of this amendment and beginning January 1, 2016, every state was required to expand the definition of the small group market to include employers with up to 100 employees. Prior to January 1, 2016 states had the flexibility to maintain the definition of a small employer to those with up to 50 employees and most states continued to do so.
The PACE Act repeals the mandatory expansion of the small group market to employers with up to 100 employees and reverts to the prior definition of up to 50 employees, although the states maintain flexibility to define the small market as up to 100 employees if they wish.
Under the ACA, health insurance offered in the small group market must meet strict underwriting requirements and cover all essential health benefits- conditions that do not apply in the large group market. Concerns about steep price increases and loss of benefit design flexibility from many businesses with 51 – 100 employees who would be re-classified as a “small employer” prompted this bi-partisan amendment to the law.
What Happens Now?
Numerous questions surround the passage of this amendment to the ACA given the fact that the change has happened so late in 2015. Insurance carriers have already filed their small group 2016 plan rates assuming the expansion of this market space and many employers impacted by their re-classification have already secured coverage or are finalizing plans for 2016 coverage. Here are some questions that hopefully will be addressed in the near future:
Employers who are impacted by this ACA amendment should monitor the situation and determine what may be the best course of action for your employees.