ACA Small Group Market Rule Repealed

On Oct. 7, 2015, President Obama signed into law legislation that repealed the Affordable Care Act (ACA) requirement that every state’s small group market be expanded to include businesses with 51-100 employees. Previously, most states defined “small employers” as those with 50 or fewer employees.

The President signed the Protecting Affordable Coverage for Employees (PACE) Act following its passage in the House and the Senate, where it earned bipartisan support. The PACE Act eliminates the ACA requirement that state small group markets be expanded to include businesses with 51-100 employees. However, the act also gives states the option to include businesses with up to 100 employees in their small group markets.

The small group market requirement would have significantly impacted mid-sized businesses by requiring them to purchase employee health coverage in the small group market rather than the less-regulated large group market. It was expected that the additional regulations would reduce health plan flexibility and increase costs for both employers and employees.

While many mid-sized businesses have taken advantage of transition relief delaying the change from the large group market to the small group market, the PACE Act provides permanent relief from the requirement. The Department of Health and Human Services (HHS) had previously stated that small group market regulations for mid-sized businesses would not be enforced if mid-sized businesses renewed their policies by Oct. 1, 2016.

States that have already adopted the expanded small group market definition into their state laws may choose to undo those changes.