Small Group Bill Passes Senate!

Boy, that was fast. On Tuesday, we reported that the H.R. 1624, the Protecting Affordable Coverage for Employees (PACE) Act, had passed the House and was on its way to the Senate, where we said passage was a little less certain. Well, as NAHU reports, yesterday “the Senate took action to pass S. 1099 through unanimous consent.”

This is a very important bill because it repeals the ACA provision that says employers with 51 to 100 employees will be defined as small groups starting in 2016, instead giving “states the flexibility to determine the size of their small-group market.” States have had this option for the past two years, and every single one chose 50 rather than 100 employees as the cutoff point.

The bill will now go to President Obama’s desk for his signature.

Without this bill, mid-sized employers, most of whom will be required to offer coverage next year under the employer mandate, would have faced big premium increases as they became subject to the essential benefits requirement and modified adjusted community rating rules. The mandate does still apply to companies with 50 or more full-time equivalent employees, but at least these groups shouldn’t see their premiums skyrocket. Companies with 2 to 50 total employees have been facing these premium increases for the past two years.

What this means for HPA brokers

If you have a private exchange site through Health Partners America, our guess is that you, like us, aren’t hoping for a collapse of the small group market, so the passage of the PACE Act is good news. However, you probably see the writing on the wall for employers that are subject to the new rating rules. When smaller employers move into ACA-compliant plans, which can no longer rate for gender or medical conditions, many see their premiums increase significantly, so significantly in fact that many have decided that they’re no longer going to offer health insurance.

This decision is reinforced by the fact that the group plan blocks most employees and their family members from receiving a premium tax credit in the individual market, which is often more significant than the employer’s contribution to premiums. Since employers offer benefits to attract and retain employees, smaller companies that can’t afford their premiums and aren’t required to offer coverage are making the decision that it just doesn’t make sense to keep paying for a benefit that hurts their workers.

That’s where your private exchange site comes in handy. Setting up a private exchange doesn’t mean that you’re hoping small employers will drop their coverage, but it does mean that you have an individual solution for their employees if they do. These companies can still provide a full range of ancillary benefits (that they’ll now be able to afford since they’re no longer paying for health insurance), and that’s probably something you can help them with as well.

Final Thought

If you’re pleased with this outcome, you have the National Association of Health Underwriters and The 50 to 100 Coalition to thank. Everyone involved did a ton of work to make life easier (and more affordable) for mid-sized employers. If you’re not yet a NAHU member, you should join today.

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