Important ACA Modification Law Passed – PACE Act

Yesterday (October 7, 2015) the President signed the Protecting Affordable Coverage for Employees, or PACE Act, giving states the flexibility to define “small employer group”, for purposes of the Affordable Care Act (ACA).  The PACE Act also redefines the definition of small employer to 1 – 50 employees.  This is an extremely important tweak to the ACA, especially for employer groups that employ between 50 – 100 full and part-time employees.  

Had the PACE Act not been signed into law, the ACA was set to change the definition of small employer group from the current, 1 – 50 employees, to 1 – 100 employees, as affected plans renewed on and after January 1, 2016.  In short, rather than a federally mandated standard definition of small employer group going into effect in 2016, individual states will now be allowed to define their small employer group markets as they see appropriate, providing the remain between the 50 (minimum) – 100 (maximum) threshold.  

Importantly, some states have already passed ACA mirroring legislation making their small employer group market 1 – 100 employees.  Such states will need to pass legislation if they want to revert to the now standard size definition of 1 – 50 employees. 

This law is important as employer groups with 51-100 employees will NOT be subject to certain provisions of the ACA that impact the cost of health insurance coverage, unless such employers reside in a state that defines small employers as those with 1 – 100 employees.  These provisions are: 

1. Modified Community Rating – reduces the allowable rating considerations to age, geographic location, tobacco use, and family size.
2. 10 Essential Health Benefits – requires affected plans to include coverage for 10 specific healthcare services, notable inclusions are pediatric dental and vision, maternity, and mental health.
3. Metallic (standardized) plan design constraints (i.e., bronze, silver, gold, platinum)

In short, the PACE Act gives states the authority to define group size, which has a significant impact on employers ability to have more (or less) plan design, benefit, and premium rate setting flexibility. For more information on both the direct and indirect impact of the ACA’s definition of small employer group, and the provisions of the ACA which apply to groups of a certain defined size, the Society of Actuaries published a study addressing this matter.  Click – http://actuary.org/files/Small_group_def_ib_030215.pdf  to access this study.

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