Congress Stops ACA's New Definition of Small Business

Samantha Beasley, Director of Public Policy, L.A. Area Chamber

October 7, 2015

An Affordable Care Act (ACA) provision that changes the definition of a "small business employer" has garnered bipartisan opposition in Congress and was effectively reversed last week. The Protecting Affordable Coverage for Employees (PACE) Act, stops the ACA from requiring that businesses of 51-100 people enter the small-group insurance market in 2016 and manage the costs of new coverage.

Under the ACA, small businesses must offer employees health plans that meet the law's 10-essential benefit requirements. Yet a provision therein defines a small business employer as one with 100 or fewer employees- whereas most states define a small business as one with 50 or fewer employees.

Companies falling into the new ‘small business definition’ will have to comply with the ACA's requirements on employee health plans and enter the small-group insurance market as of Jan. 1, 2016. Companies in California can opt to purchase coverage through Covered California’s small business exchange, but there is broad concern that those companies will end up having to offer more generous benefits than they do now.

According to the New York Times, the definition change was included in the law because some believed that reclassifying small businesses would bring millions of new customers into the insurance market and stabilize the industry for small employers. However, the American Academy of Actuaries predicts the change could "result in significant premium-rate changes for some groups," especially among employers with relatively young and healthy employees.

Last week, California Health Line reported that in the House, 229 lawmakers, including 43 Democrats, had endorsed legislation to keep the change from taking effect. Forty-three senators, including 10 Democrats, were also in support of allowing states to use the current definition; joining many industry and business trade groups such as America's Health Insurance Plans, the Blue Cross and Blue Shield Association, the National Federation of Independent Business and the U.S. Chamber of Commerce.

President Obama is expected to sign the PACE Act, referencing his commitment to making improvements to the legislation without compromising its core intent. The bipartisan support we are seeing on this issue has brought optimism that Congress can work together on future improvements to the ACA.

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