This January, the Affordable Care Act’s definition of "small employers" was slated to expand. Under a new requirement, it would have included businesses of up to 100 employees – doubling its previous limit of 50.
Adding businesses with 51-100 employees to the small group market would have expanded it significantly. The National Association of Health Underwriters (NAHU) estimated that businesses of this size employ 30 percent of the workers in the 1-100 employee size classification. The new requirement would also have led to some serious problems. But the story isn’t over yet.
Moving to the small group health insurance market?
News of the definition-change had employers sweating, for a few reasons. Under the new ACA requirement:
- Employers whose insurers don't participate in the small group market would not have been able to keep their health plans
- Most premiums (two-thirds) would have increased by an average of 18 percent, NAHU predicted, as employers moved from composite rates to the new ACA member rating
- As rating rules became more stringent, employers might not have been able to get discounts based on their claims history, as they had before
Those concerns spawned the 50-100 Coalition, which fought alongside other advocacy groups to reform this part of the ACA. Thanks to their efforts, PACE has passed.
Protecting Affordable Coverage for Employees (PACE)
The PACE Act passed in the House and Senate just last month, and is now signed into law by the President. Rather than mandating the reclassification of small businesses to include groups of up to 100 employees, it gives states the freedom to choose to expand, or not, based on their own local needs.
Of course, states that do choose to expand the definition of small business are likely to face the same problems listed above. There's still work to be done. So the same advocacy groups that fought for PACE will continue to carry the torch, working to convince states to keep their definition of small businesses intact.
Turbulence ahead: what problems remain for 2016?
While most employers are relieved that PACE has passed, there are still several hurdles to overcome. For example:
- Insurers who've filed their 2016 rates based on the now-repealed requirement may find it's too late to refile.
- Certain states have already passed legislation to be consistent with the now-repealed ACA requirement. If they're to bring back the previous definition of small business, they'll have to pass additional legislation now.
- In states like California, where the Legislature is out of session, a special session would need to be called to restore the definition of small business before the new law takes effect in January.
- Some states may choose to move forward with the new definition despite having the option to refrain.
As always, Heffernan’s Benefit Advisory Services is here to guide you through the twists and turns of the Affordable Care Act and group health insurance. Stay tuned to our Compliance Updates for more helpful tips.