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ACA’s Definition of Small Employer for Insurance Groups Left Up to States

In what has become a regular occurrence, the Affordable Care Act (ACA) has seen another change, this time in the form of the Protecting Affordable Coverage for Employees (PACE) Act. The most recent bill, signed into law by President Barack Obama, allows states to change the definition of a small business for group insurance purposes, meaning premiums for thousands of employees may not increase as was originally feared.

The new law grants states the “flexibility in determining the size of employers in the small group market,” allowing them to extend the definition of a small employer to organizations with up to 100 employees. Essentially, the PACE Act nullifies the mandated change of the definition of a small employer, which was set to increase from its previous 50 employee mark, to include groups of up to 100 employees.

Senators Jeanne Shaheen (D-N.H.) and Tim Scott (R-S.C.) co-sponsored the legislation, which was passed unanimously by both the House and Senate.

Shaheen said, “This legislation makes a helpful change to the law for small and mid-size businesses by limiting potential premium increases and letting the states determine what’s best for their market.”

Applicable Large Employer Status Unchanged

Despite this update, the bill does not impact the definition of large employers – aka Applicable Large Employers (ALEs) – for the purposes of the employer shared responsibility rule, which requires organizations to offer minimum essential coverage to employees or face penalties. All ALEs still will be required to submit the required forms to the IRS and properly furnish them to their full-time employees.

Why the Large Group Market Is Important

Allowing organizations with 51 to 100 employees to remain in the large market is significant because there are a number of ACA requirements that apply to the small group and not the large group. It is believed that the small group requirements would have increased premiums for businesses that were redefined into this category.

The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only.  It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.

About the author
Author picture, Jason Bodin
Jason Bodin
Jason Bodin has been the communications pulse for a number of organizations, including Paycom, where he serves as director of public relations and corporate communications. He helped launch Paycom’s blog, webinar platform and social media channels. He aided in the development of Paycom’s tool to assist organizations in complying with the Affordable Care Act, one of the largest changes in health care the country has seen. A graduate of the University of Oklahoma, Bodin previously worked for ESPN and Fox Sports. In his free time, he enjoys adventuring with his family, reading and strengthening his business acumen.