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"Small Group" Re-Defined Under the Affordable Care Act

Compliance Advisor/Benefits Attorney at HNI

Last week, on October 7, 2015, President Obama signed legislation called the Protecting Affordable Coverage for Employees (PACE) Act that amends the Affordable Care Act (ACA) definition of a “small employer” for the purpose of purchasing health insurance coverage.

The PACE Act repeals the mandatory expansion of the small group market to employers with up to 100 employees and reverts to the prior definition of up to 50 employees, although the states maintain flexibility to define the small market as up to 100 employees.

Under the ACA, health insurance offered in the small group market must meet strict underwriting requirements and cover all essential health benefits - conditions that do not apply in the large group market.

The PACE Act’s enactment means that employers in that 51-100 size bracket that buy health coverage will not be subject to the small-group market rules.

So What Does The Change to the ACA Small Group Definition Mean?

HNI will continue to update you on this matter as the effects of this new law change become better known. At this time, there are 4 things to be aware of relative to the PACE Act:

1) Self-insured employers are not affected by this new legislation.

If you're self insured, ignore the new guidance - it does not apply to you. 

2) Things are still uncertain for those with under 100 employees.

Insurance carriers have already filed their small group 2016 plan rates assuming the expansion of this market space.  In addition, many employers impacted by their re-classification have already secured coverage or are finalizing plans for 2016 coverage.

Will insurance carriers be able to modify small group rates with the now smaller market space? Will employers between 51-100 employees be able to shop for other coverage in the large group market and have enough time to do so? We don't have answers to all of these questions at this time.

3) States may extended the definition of small employer.

The PACE Act repeals the mandatory expansion of the small group market to employers with up to 100 employees and reverts to the prior definition of up to 50 employees.

The new law gives states the option to extend the definition of small employer to those who employ an average of at least 1 but not more than 100 employees on business days during the preceding calendar year.

4) Applicable large employers are still defined in the same way.

The definition of applicable large employer under the ACA's "pay or play" and information reporting provisions has not been changed.

As we learn more about how the new law will be applied, we will post updates to the blog.  In the meantime, please comment below with any questions you may have!


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Topics: Safety / Compliance HR / Employee Benefits