For employers, the Affordable Care Act (ACA) has been a whirlwind of change. And beginning in 2016, the definition of a health insurance “small group” was set to expand to include employers with up to 100 full-time employees. This would have forced many midsized employers into the small group market.
Fortunately, advocacy groups such as the U.S. Chamber of Commerce and the 50-100 Coalition fought back, and on October 7, 2015, President Obama signed into law the Protecting Affordable Coverage for Employees (PACE) Act. The Act amends the ACA to continue defining “small group” as employers with up to 50 employees as it has commonly been, though it gives states the option to adopt their own small group definitions.
How would small group reclassification impact employers?
Small employers are treated differently than large insurers under the ACA for insurance regulation purposes, and there are several requirements that apply to the small group market that don’t apply to the large group market. For example:
- Rates are age-banded for small groups (meaning that older employees pay higher premiums than younger employees), and a separate premium applies for each individual. Large group premium rates are set by various factors such as industry, claims experience, etc., and large groups have composite rates (a single rate for a family).
- Small group insured plans must cover the 10 essential health benefits (EHB).
- Small group insured plans must meet specified actuarial values, while large group plans can provide any actuarial value as long as they meet the 60 percent minimum value requirement.
The fact is, many employers could have lost their existing health plans (if their insurer doesn’t participate in the small group market), and the requirements of suddenly being redefined as “small” employers likely may have increased premiums and caused a lot of administrative headaches. In short, the transition could have been painful, so for many employers, the PACE Act is a welcome relief.
What doesn’t change under the PACE Act?
The PACE Act doesn’t affect ACA rules determining if an employer is considered an “applicable large employer” (ALE) for purposes of the employer shared responsibility (play or pay) rules. It also doesn’t change the requirements regarding employee counting methodologies for the FF-SHOPs, state-based SHOPs, medical loss ratio (MLR), and risk adjustment and risk corridor programs.
What’s ahead for Texas employers?
The PACE Act allows each state to determine its own small employer threshold. Back in 2013, the Texas Legislature enacted SB 1332, which maintained the Texas definitions of small and large employer and removed a requirement that only “eligible” employees be counted. So going forward, Texas will maintain the definition of small employer as those with no more than 50 employees.
While that news is a relief to many employers, there are bound to be more ACA complexities ahead. To keep informed and stay ahead of the curve, count on the group health insurance experts at Higginbotham Insurance. We can help you design an attractive benefits package to recruit and retain talent while keeping control of your bottom line.
Click to edit your new post...