Protecting Affordable Coverage for Employees Act

On September 28, 2015 both sides of Congress came together to pass the Protecting Affordable Coverage for Employees (PACE) Act, an amendment to the ACA, which President Obama then signed.

Small employers were formerly defined as those with 50 or fewer employees while large employers were those with 100 or more in 2015.  While states can elect to set the definition of “small employer” it is expected that most will follow the federal guideline.  The “small employer” definition will now remain that of an organization with 50 or fewer employees and large employers are those with 51 or more employees.

Employers with 51 or more employees can access to large employer health insurance markets and eliminates some small group market requirements that do not apply to the large group market.

  • Small employers are required to cover ten essential health benefits and to offer plans that fit into the actuarial value levels (platinum, gold, silver, and bronze) as defined by the ACA.
  • Unlike with large employer plans, small employer insurers may only use census date such as age, geographic location, family composition, and tobacco use in setting rates.
  • This change also eliminates employers’ ability to offer coverage through the SHOP exchange (Small Business Health Options Program).

Overall it is expected that this change will reduce health care expenses to the approximately 3 million Americans employed at organizations with 51-100 employees.  The flipside of this is that it is possible that the coverage may not meet certain minimum standards otherwise expected of small employers.  The change is also expected to keep younger, healthier people in the health care market lowering costs for everyone in the large employer insurance market.  In the aggregate, the number of people with healthcare coverage is not expected to change substantially.

“The apolitical American Academy of Actuaries, for example, predicted that increasing the size of small groups would likely raise premiums for the mid-size groups and might also raise premiums for small groups. It also raised the concern that healthy mid-size groups might self-insure, leaving primarily unhealthy groups in the small group insured market.” (1)

It is interesting to note that self-insuring is still seen as a threat.  This could impact future legislation, but for now, and leading into an election cycle, perhaps this will be the only change we’ll see for a while.