ACA Small Group Market “Fix” | The Protecting Affordable Coverage for Employees (PACE) Act
Legislation Redefining the Affordable Care Act’s (ACA) “Small Group” Health Insurance Market Passed in Congress on October 1, 2015
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THE PACE ACT
Each state will continue to determine IF AND WHEN to expand the definition of the small group health insurance marketplace to include companies with 51-99 employees. Initially, under the ACA, small group is defined as fewer than 50 employees from 2014 – 2016 to expand to fewer than 100 in 2016.
DEFINITION OF SMALL GROUP
The Protecting Affordable Coverage for Employees (PACE) Act allows each state to continue to determine if employers with 51-99 employees are “small or large” group health plans. Importantly, regardless of the passage of the PACE Act, state-by-state variances will remain as states, along with state insurance departments, determine the definition of the small group market.
As of October 2, 2015, the PACE Act is awaiting President Obama’s signature. Fearing increasing premiums and loss of coverage options for companies with 51-99 employees, it is widely anticipated that President Obama will NOT veto this ACA modification. Nevertheless, the timing of this change increases uncertainty as to projected rates and which risk pools and plans are subject to “community rating.”
- Community Rating: The ACA community rated risk criteria includes no rating based on health history or experience rating in the small group, fully insured market. The ACA community rating regulations limit age rating to a ratio of 3 to 1 (oldest to youngest) and tobacco use rating to a ratio of 1.5 to 1; thereby establishing limitations leading to one common rating pool.
- Marketplace Impact: The definition of group size shifts certain plans into the common rating pool within the health insurance exchange. Depending on claims experience, joining the exchange decreases or increases costs relative to other risks within the pool within an analysis of comparatively healthy and unhealthy plans for underwriting purposes. By allowing states to define group size, the PACE Act permits some companies with 51-99 employees to avoid community rating (noting the impact will vary by state).
This industry change does not impact the ACA employer coverage mandate and penalty exposure requirements (known as “Shared Responsibility”), requiring employers with 50 or more full-time employees (including full-time equivalent employees) to offer qualified, affordable coverage as of the plan year on or after January 1, 2016.
We anticipate implementation challenges and resulting fixes will continue as the health insurance market stabilizes in this time of unprecedented change. Oswald Companies will continue to provide timely updates and concise information as implementation guidance is issued.
Oswald Companies | Health Care Reform 2015
Andrea Esselstein, J.D. | firstname.lastname@example.org; 216.658.5012
Luke Clark, Sr Benefits Consultant | email@example.com; 216.367.8758
Disclaimer: Materials are solely for informational purposes as an educational resource. Please contact counsel to obtain advice with respect to any specific issue.