Changes to the PACE Act.

Benefits Insights, Winter 2016

On October 7th President Obama signed into law the Protecting Affordable Care Coverage for Employees (PACE) Act, which amends the Affordable Care Act (ACA) to allow states to decide whether to set their maximum size limit for “small groups” at 50 employees or 100 employees.

For the past year, ACA classified small groups as those with fewer than 50 employees. Beginning in 2016, however, the provision would have required all states to raise their small group cutoff to 100 employees. This would have meant that employers with 51-100 employees would no longer be considered small groups and would not be able to keep their current lower-rate health care plans.

Those in favor of the new law believe that leaving the original definition of small groups in place would have disrupted many states’ small business markets and imposed higher rates on many small companies, causing unnecessary hardships. Opponents argue that leaving the definition cutoff up to each state could cause confusion as well as deprive employees of midsize companies important protections.

Essentially, PACE keeps the existing definition of small groups but, beginning January 1, will permit states to decide whether to expand the classification to include employers with 100 or fewer employees or to keep it at 50. This may reduce the number of small businesses that would face higher health insurance premiums.

Changes to the PACE Act