On October 7, 2015, President Obama signed the Protecting Affordable Coverage for Employees (PACE) Act repealing the Affordable Care Act (ACA) requirement that the small group market in every state be expanded to include businesses with 51-100 employees. Although the PACE Act repeals the required expansion of the small group market, states retain the right to determine the threshold for small versus the large group market.
Previous ACA Requirement and Concerns
Employers that have between 50 and 99 full time equivalent employees are applicable large employers (ALEs) when it comes to several Affordable Care Act (ACA) provisions. Effective for 2016 plan years, the ACA also expanded the definition of a “small employer” to include those that employed an average of between one and 100 employees. Most states have historically defined “small employers” as those with 50 or fewer employees for purposes of defining their small group health insurance market.
Under the small group market reforms of the ACA, a "small" employer's insured health plan is subject to age-banded rating. Historically, these mid-size ALEs have been community rated or experience rated in the large group market. Depending on the demographics of the mid-size ALE, the change to age-banded rating can result in significant premium increases for some employees and subsequently the employer.
The PACE Act eliminates the ACA’s new definition and gives states the option of expanding their small group markets to include businesses with up to 100 employees.
Impact on Colorado Employers
Colorado already has a law on the books expanding the small group market to include employers with up to 100 employees. Despite the PACE Act, without a change to Colorado law, Colorado employer groups with up to 100 employees will still be considered a small group in the health insurance market effective January 1, 2016.
360benefits will continue to keep you updated as we hear more about Colorado’s approach to the PACE Act.