On Oct. 7, 2015, President Obama signed, without comment, the Protecting Affordable Coverage for Employees Act, which amends the Affordable Care Act’s definition of a “small-group,” a move intended to force mid-sized companies into providing richer coverage to workers.
The PACE Act (H.R. 1624 and S. 1099) repeals the mandatory expansion of the small group market to employers with up to 100 employees and reverts to the previous definition of up to 50 employees. The Act gives states the flexibility to choose their own numerical definition of a small employer.
Proponents said the new law will lower premiums, stabilize small group markets, and enable employees and employers to keep coverage they previous had. The U.S. Senate passed the bill on Oct. 1, and the House passed it on Sept. 28.
Previously, the ACA required every state to expand the definition of the small group market to include employers with up to 100 employees, starting Jan 1, 2016. As a result, employers with 51-100 workers would have been forced to drop the coverage they previously had and to sign up for more expensive plans, with consumer protections (such as essential health benefits and restricted rating bands) that large employers with more than 100 employees do not have to provide.
Approximately 2 million employees would have experienced a double-digit increase in their health care premiums due to the ACA’s small group health plan rules, according to Joseph Pitts, R-Pa., chairman of the House Energy and Commerce’s subcommittee on Health. He was citing statistics from the American Academy of Actuaries that also projected more than 150,000 businesses would have been harmed if the PACE Act had not been put in place.
The problem was, employers with 50 to 99 workers were defined as large employers that must purchase health insurance or pay a fine, also starting in 2016. Most of them would have bought coverage on the more expensive small-group market. Changing the law resolved that discrepancy.
The National Association of Insurance and Financial Advisors welcomed the news. “This bipartisan modification to the ACA will help NAIFA members continue to serve their small employer clients and avoid plan disruption for employers with 51-100 employees,” said NAIFA CEO Kevin Mayeux. “Without a modification, employers with 51-100 employees [could not have kept] their current health care plans or purchase or renew plans that do not conform to the new regulations,” Mayeux added.
Some states that have already implemented the previous ACA rule expressed hesitation about going back to the 50-worker definition, saying rate increases have already gone into effect, insurers would have to re-file plans with insurance commissions, and reverting would create chaos for brokers and small businesses. Some Democrats in the House had emphasized the consumer-protection aspects of the legislation, while acknowledging that costs likely would increase for small groups.
Questions remain, such as: (1) how will each state determine the size of its small group market; (2) can insurers change small group rates back before policies take effect Jan. 1; and (3) will states allow some form of transition period to allow employers to move back into the coverage they had before.