President Obama has signed into law the Protecting Affordable Coverage for Employees (PACE) Act. On September 28, 2015, the House of Representatives passed H.R. 1624 through voice vote and on October 1, the Senate passed the legislation through unanimous consent.
How Will PACE Act Affect the Affordable Care Act (ACA)?
Small group is currently defined as employers with 2-50 employees. As of January 1, 2016 under the ACA, the definition of small group was set to expand 1-100 employees. The PACE Act repeals the mandated small group expansion and it gives the individual states the flexibility to determine the small group market definition, rather than being forced to the national standard.
Several states, including California, have already enacted legislation that expands the small group market definition to 100 employees. However, for those states that have not taken any action to date regarding the definition of small group, we are awaiting confirmation form the departments of insurance and legislators as to whether the states will accept the new federal standards or if they will take action of their own to expand the small group market definition of up to 100.
How Does PACE Affects the California Employer?
Unless further guidance is issued by California, we are moving forward with the small group expansion for employers with 1-100 employees with new business or renewals beginning January 1, 2016. For employers who have 51-100 employees, there will be significant changes in their benefits, rating, and administrative process. The most significant changes will be as follows:
- Rates in small group are age-banded, whereas large group premium rates are composite rates. In age-banded rates, older employees pay a higher premium than younger employees.
- ACA rates in small group are “member-level” rating (also known as “community rating”), whereas large group premium rates have a family rate for the plan, regardless of number of dependents. With member-level rating in small group, larger families will pay a significantly higher premium as they are individual rated (some limits apply).
- Small group plans are required to cover the 10 Essential Health Benefits, including pediatric dental and vision.
- Small group plans are required to meet specified actuarial values +/- 2 percent (60%, 70%, 80%, or 90%, also referred to as the metal tiers), whereas large group plans can provide any actuarial value as long as they meet the minimum value of 60% requirement.
Action Items for Employers with 51-100 Employees:
- Evaluate your plan options in 2015.
- Consider an Early Renewal option.
- Market alternative carriers for 11/1 or 12/1/15 effective dates or extended renewal periods.
- Compare current composite rates to age-banded, member-level rates in 2015 to see how the new rating will impact your company.
- If you are an employer with 50 or more full-time equivalent and do not currently have coverage, evaluate your plan with a 2015 effective date versus age-banded rates in small group.
Please contact MNJ Insurance Solutions at (714) 716-4303 for more information.
This content is provided for informational purposes only. While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy and completeness. The information provided should not be construed as legal or tax advice or as a recommendation of any kind. External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.