Last week, President Obama signed the Protecting Affordable Coverage for Employees (PACE) Act. PACE changes the definition of a small employer for purposes of purchasing health coverage (not for other ACA purposes).
Effective January 1, 2016, under the Affordable Care Act, employers with 100 or fewer workers were to be classified as small employers. Currently, small employer medical plans have strict underwriting requirements, are required to cover specific benefits, and may be subject to certain pricing structures (such as age and tobacco banded rates). Employer plans in the large group market do not have to cover the same benefits as small employer plans.
States had the option of designating employers with between 51-100 employees as large employers through 2015. The PACE Act makes this designation permanent, and revises the definition of small employer under ACA to apply to businesses with 50 or fewer employees. Now, mid-sized employers will not be required to change coverage to comply with small group market requirements. States are still permitted to treat businesses with between 51-100 employees as small employers if they desire.
This Act provides welcome relief for mid-sized businesses, but does leave open questions. Since states can still designate employers with fewer than 100 employees as small for coverage purposes, employers do not have clear direction. In addition, many employers may have already priced and rated their plans for the upcoming plan year. Mid-size employers should discuss with their insurance carriers as to how their plans and rates will be structured for renewals on or after January 1, 2016 and watch their state announcements for confirmation of following the new federal rules.
