Our last post explained that the PACE Act was signed into law effective October 2. This means that the federally-mandated small group expansion has been repealed. Previously under the ACA, employers with up to 100 employees would have been reclassified as a “small group” effective January 1, 2016. Now, with the PACE Act, each state has the flexibility to create its own definition for small group.

On the surface this seems like good news. Employers in states that had not yet enacted any legislation on this issue can benefit from the PACE Act, adopting or holding onto the 50-employee threshold. We hope that other states recognize that increasing the definition of “small group” from 50 to 100 employees will create a hardship for many employers (as outlined in our August 18 post) and take immediate action to reconcile their laws.

However, upon closer examination, it seems that some states may not have the 50-employee small group threshold in place by January 1. Consider these facts:

  • California is one of several states, including Colorado, Connecticut, Washington, Oregon, Virginia, Vermont, Maryland, Nevada, and the District of Columbia, that passed laws redefining “small group” beginning in 2016 according to the original ACA threshold of 100 employees, to be consistent with the ACA. Now these states will need to pass new laws to bring their small group definition thresholds back down to 50, according to
  • For California specifically, since the Legislature is currently out of session, Governor Jerry Brown would have to call a special session to change the definition in time for the scheduled January 1, 2016 change. BeaconPath’s contacts in the Capitol do not believe California will adopt this change. Also, during the Covered California board meeting last week, Executive Director Peter Lee said there does not appear to be strong political will to change back to “50 or fewer” in California. That said, it is still technically possible, so we cannot say for certain it will not impact California.
  • Despite the PACE Act, some states may choose to proceed with the original 100-employee threshold. For example, reports that Washington’s insurance commissioner prefers the 100-employee threshold.

How will your company be impacted?

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