States May Shape ACA Definition Of 'Small Employer'

October 26, 2015

Michael J. Morris

Publication
Law360

Michael J. Morris



Law360, New York (October 26, 2015, 12:16 PM ET) -- On Oct. 8, 2015, President Obama signed into law the Protecting Affordable Coverage for Employees Act of 2015, or the PACE Act. While the PACE Act makes relatively minor amendments to Section 1304(b) of the Affordable Care Act, and Section 2791(e) of the Public Health Service Act, the ultimate effects of the PACE Act will assuredly prove significant for employers of fewer than 100 persons, their employees and the small group market.

Each section of federal law amended by the PACE Act specifically defines what constitutes “large” and “small” employers for the purpose of determining how employers provide health coverage for their employees and what type(s) they can provide. The distinction between “large” and “small” employers in the context of group health coverage has long been significant under many states’ insurance laws, as even before the 2010 passage of the ACA, many states imposed specific requirements on small group coverage and implemented significant restrictions on health plan’s underwriting of small employer groups. In New Jersey, for example, the state’s Small Employer Health Benefits Program, implemented in 1994, requires health plans offering coverage in the small group market to offer standardized benefit plans, and significantly limits the factors plans can use to set rates (including pre-existing health conditions of covered employees). New Jersey law also required health plans offering small employer health coverage to maintain a minimum medical loss ratio (MLR) long before the ACA.

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