Employee Benefits Compliance, Insurance Market Reforms, Small Employers

President Signs PACE Act Capping “Small Employer” Definition at 50

president obama

President Obama signed the PACE Act (Protecting Affordable Coverage for Employees, H.R. 1624) on October 7, 2015. The PACE Act amends the Affordable Care Act (ACA) definition of a “small employer” by continuing to define “small employer” as one who employed 1-50 employees, for the purpose of purchasing health insurance coverage. However, a State can affirmatively elect to extend the definition to include employers who employed up to 100 employees during the preceding calendar year.

The PACE Act was signed because, as of January 1, 2016, the ACA and Public Health Service Act (PHSA) would have redefined employers with 51-100 employees as “small employers” for purposes of buying health insurance policies. Currently and in prior years, these employers were “large employers” for this purpose.

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 since the PACE Act has become law.  It’s not clear at this time what California will do.  The Legislature is already in a special session and has recessed (but not officially “adjourned”) until January 2016.  The Governor could call the legislators back into the special session to address this issue (most commentators think this is unlikely), or the legislators could enact legislation when they return in January, or they could just continue with the current definition of small employer (up to 100 employees).  Since many employers in the 51-100 size are already on track to early-renew (as large employers) as of December 1, 2015, the California Legislature could wait until January to re-define large employers as 51+ without adversely affecting most employers in the 51-100 size market.

For additional information, see Leavitt’s October 2nd article at https://news.leavitt.com/health-care-reform/pace-act-employers-with-51-100-employees-would-not-be-re-defined-as-small-employers/