Last night, President Obama signed into law the PACE Act. Passed by both the House and Senate with unanimous consent, this law repeals the mandated small group expansion from groups of up to 50 employees, to groups of up to 100 employees – which was to go in to effect on January 1, 2016. States will now have the flexibility to determine the size of their small group market instead of being forced into the national standard.
California, Colorado, Maryland, New York, Virginia, Vermont and the District of Columbia have enacted laws or issued regulatory guidance changing their small group definition to the 1-100 employee definition in 2016. Most states will be reverting back to 50 lives for community rating, however, these states will need to enact legislation prior to considering a change.
Expansion of the small group definition subjects non-grandfathered insured plans of employers with 51-100 employees to the ACA community rating standards and requires them to cover all Essential Health Benefits. With expansion, these 51-100 groups will face worse rate structures, narrow networks and restricted access to out-of-network services.
I had a conversation with the New York regulators about the likelihood of anything changing for January 1, 2016. As expected, I was told that the regulators were very clear with the federal government. If a change were to be made – it would have to be early. New York is too far down the road at this point to make any changes. The rates are filed and approved, the exchanges are loaded and renewal decisions have been made by many groups.
For New York, many groups in the 51-100 category have, or will, early renew on December 1 to lock in more favorable pricing. Others have made the decision to move to a PEO, which allows them to avoid community rating all together. So the real impact on small group pricing (estimated at 2-3%) won’t be felt until 2017. As the legislative chair for the New York State Association of Health Underwriters, pushing for this change will be our priority. We hope that the legislators will see the adverse impact on these vital employers in New York, and adopt the 50 and fewer standard that is now, and will be, the prevalent structure in most states. It only makes sense since 50 lives dovetails with the employer mandate threshold.