Note: The legislation discussed in the following report involves no change in the existing provision in the Affordable Care Act (Obamacare) that exempts employers with 49 or fewer employees from having to provide health insurance coverage to employees. It is about legislation called “the PACE bill” that changes a provision in the ACA related to employers of 51 to 100 employees.
President Obama yesterday (Oct. 8, 2015) signed into law a bill passed by the Senate and House last week that will reverse a provision in the Affordable Care Act (Obamacare). Without the new law, companies with 51 to 100 employees would have been forced to participate in “small group markets” for health insurance next year rather than “large group plans” as they have in the past.
The ACA had mandated that effective January 1, 2016, the definition of a small group employer would change from its current size (one to 50 employees) to one to 100 employees. Without passage of the new law, businesses with 51 to 100 employees would have been forced to participate in the ACA’s Small Business Health Options Program (SHOP) where they would face new coverage requirements, likely pay higher premiums, and could lose their current plans.
The new bill, the Protecting Affordable Coverage for Employees (PACE) Act will maintain the current definition of a small group market as one to 50 employees but give individual states the flexibility to expand the group size if they feel the market conditions in their state necessitate the change.
(While extremely rare, this isn’t the first Obamacare revision to pass Congress. In 2011, lawmakers voted to eliminate extra paperwork that businesses were going to have to file with the IRS.)
Small Group vs. Large Group Markets
“Small employers are treated very differently under the ACA than large employers for purposes of insurance regulation,” Timothy Jost, a professor at the Washington and Lee University School of Law in Lexington, Va., told the Society of Human Resources Management.
For example, small group market plans must:
- Cover 10 essential health benefits.
- Fit into the actuarial value levels (platinum, gold, silver and bronze) defined by the ACA.
- Participate in the risk adjustment program and be part of a single risk pool for setting premiums.
- Only consider age, geographic location, family composition and tobacco use in setting rates.
- Large group plans are not bound by any of these requirements.
The Congressional Budget Office estimated that the PACE Act will reduce the deficit by $400 million over 10 years because it would reduce premiums in the midsize employer market, thus increasing taxable income of employees.
Potential impact on businesses with less than 50 employees?
Businesses that have fewer than 50 employees are not required to provide healthcare insurance under the ACA.
However, those that do provide insurance may see increases in their rates without the addition of the risk pool found in companies with 50–100 employees.
Advocates of requiring the 50–100 employee companies to shift to the small group market argued the move would make insurance for smaller companies more affordable and would stabilize the ACA’s SHOP marketplace by bringing in more participants.