ACA Small Group Rule Repealed by Congress

On Oct. 7, President Barack Obama signed into law The Protecting Affordable Coverage for Employees (PACE) Act, a measure to rescind the Affordable Care Act’s (ACA’s) expanded definition of a small employer to include business with 51 to 100 employees.  This would subject more employers to the rules of the small group insured market in all 50 states. The bipartisan bill had been passed by the Senate on Oct. 1 and by the House of Representatives on Sept. 28.

Reports have indicated that President Obama will sign the legislation into law. Although the legislation, referred to as the Protecting Affordable Coverage for Employees (PACE) Act, eliminates the ACA’s definition of the small group market, it allows states to opt to expand their definition to include businesses with up to 99 employees.

Background

The ACA, as enacted in 2010, held that effective Jan. 1, 2016, the definition of a small group employer would increase nationally and would henceforth apply to organziations with one to 100 employees. As a result, midsize fully insured employers would only have been able to purchase small group plans (unless they were renewing plans that had grandfathered status).

“Under current law in most states, employers with one to 50 employees are considered small employers while employers with 51 to 100 employees are considered large employers,” Chatrane Birbal, senior advisor, government relations at SHRM, told SHRM Online. “The PACE Act leaves the one to 50 definition in place, although states have the option of expanding the definition of small employer to cover employers with up to 100 employees,” if state insurance authorities believe that market conditions in their state necessitate the change and state legislatures pass such measures.

Advocates of expanding the small group market under the ACA argued the move would make insurance more affordable for the smallest employers by expanding the risk pool to include midsized companies, and that it would help stabilize the ACA’s Small Business Health Options Program (SHOP) marketplace by bringing in more participants.

But employers and business groups responded that leaving the size of the small group market up to individual states would protect the ability of employers to select from a broader array of coverage options and mitigate against dramatic premium increases they feared would occur, especially for midsize employers, with the expansion.