Employee Benefits Compliance, Large Employers, Small Employers

PACE Act: Employers with 51-100 Employees Would NOT be Re-defined as “Small” Employers

us capitol

The PACE Act (Protecting Affordable Coverage for Employees, H.R. 1624) has been sent to the President, and he is expected to sign it.  The Senate passed it today (Oct 2), and the House passed it Sept. 28.  The bill itself is only 5 pages.

Short summary of the PACE Act

Currently under PPACA and the Public Health Service Act (PHSA), employers with 51 to 100 employees are “large” employers for purposes of health insurance markets, but as of January 1, 2016, PPACA re-defines them to be “small” employers.  This has several ramifications—three important ones are summarized below.

The PACE Act amends PPACA and the PHSA to continue to define employers with 51 to 100 employees as “large” employers, unless a state affirmatively elects to define “small” employers as those with “at least 1 but not more than 100 employees on business days during the preceding calendar year.”  Several states–including California–have already enacted legislation that expands the definition to 100 employees, but they could enact legislation returning to the 50-employee threshold if/when the PACE Act becomes law.

Ramifications of the PACE Act Changes

If the President signs the PACE Act, there should be no need for employers with 51-100 employees to renew early in order to renew in the large group market rather than the small group market.  Some employers may be too far into the process of early renewal to change course at this time.

Staying in the large group market is significant for employers with 51-100 employees because several PPACA requirements apply in the small group market that do not apply in the large group market. These requirements probably would have increased premiums and caused administrative issues for employers who were re-defined as “small” employers. Probably the three most significant changes would have been:

  • 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 not age-banded but are set on various factors (e.g., claims, industry), and large groups have composite rates (e.g., one rate for a family).
  • Small group insured plans must cover the 10 essential health benefits, including pediatric dental care.
  • Small group insured plans must meet specified actuarial values +/- 2 percentage points (60%, 70%, 80% or 90%), while large group plans can provide any actuarial value as long as they meet the 60% minimum value requirement.

Click here for an excellent article by Professor Timothy Jost, a well-known health care policy law professor and writer.  http://healthaffairs.org/blog/2015/09/29/implementing-health-reform-pace-and-each-acts-pass-house-cms-addresses-consumers-enrolled-in-multiple-plans/  10-2-15