Both houses of Congress have passed a bill, the Protecting Affordable Coverage for Employers (PACE) Act, that will allow States to continue to have discretion to define small groups as either not more than 50 employees or not more than 100 employees. While this could be good news for employers with 51-100 employees, it is too soon to pop open the champagne.
Under health care reform, States had the flexibility to define a small employer as one with not more than 50 employees or 100 employees in 2014 and 2015, with all States required to define a small employer as one with not more than 100 employees, starting in 2016. This change in definition would subject non-grandfathered insured plans of employers with 51-100 employees to a number of requirements that would generally increase costs. Projections are that the average increase would be 18%. One of the biggest changes would be that rates would not be set for a group as a whole, rather age-specific rates, using community rating would apply to each covered person. Other changes include more limited plan choices (metal tiers only), a requirement to cover all essential health benefits and other rating rules.
The next step in the process is for the President to sign the bill. The New York Times has reported that a spokesperson has said that the President will sign the bill. The next step will be for each State to take action. In some States, the insurance commissioner will have discretion and may be able to act quickly. In other States, such as California, it will take legislative action. Earlier this year, California enacted legislation to define small groups as having no more than 100 employees, effective January 1, 2016. The legislature is now out of session, which means that the Governor would have to call a special session in order to change the law back to 50 employees.
Furthermore, we do not know how insurance companies are going to react. There is nothing in State or Federal law that would prohibit them from age rating groups up to 100 employees. Insurers could decide that they do not have the time or resources to go back to the old definition by January 1, 2016.
Once each State decides what it will do, insurance companies will have little time to decide what to do and employers will have even less time. Many employers are moving in the direction of early renewals to avoid these changes. That is probably still a good strategy because it will allow States and insurance companies time to react to this legislation.
In other words, there are still a lot of unknowns at this time.