In 2016, the definition of “small business” or “small group” market was supposed to change under the Affordable Care Act. Instead of covering businesses with up to 50 workers, the small group market would encompass businesses with up to 100.
But in a rare bipartisan move on ACA-related legislation this week, the House of Representatives, followed by the Senate, swiftly and quietly voted to make this change optional for states as part of what has become known as the Protecting Affordable Coverage for Employees Act (PACE). The House voted on Sept. 29 and the Senate on Oct. 1.
It all sounds very technical. Why does it matter whether the “small group” market includes only very small businesses or sort-of small business? What does it mean? Basically it has to do with how these mid-sized companies will be regulated, what kind of coverage they must offer workers, and at what cost.
Here are a few points to help you understand this rare consensus change to the health law:
Employer mandate: This change has nothing to do with the employer mandate. Businesses with fewer than 50 employees still will be exempt from the mandate, and those mid-sized companies will have to cover their workers starting Jan. 1, 2016. (Larger businesses already have the mandate in effect.)
Regulation and premiums: There are different rules for large and small businesses – and the fear was that moving these 51-100 employee firms into the small business market will raise premiums for the newly affected workers. That concern was voiced not just by business and insurance lobbyists or critics of the Affordable Care Act but by the American Academy of Actuaries. Had Congress not stepped in, the impact could have been particularly sharp for companies with healthier or younger workforces. That’s because these companies would have to offer the same “essential health benefits” and actuarial value as the small business plans. To get to that level, there could be a lot of change, meaning more people could lose their old plans. More disruption – and more outcry about plan cancellations and broken Obama promises.
The industry group America’s Health Insurance Plans (AHIP) wrote in a letter to congressional leaders, “By restoring the traditional definition of a small employer and giving states flexibility in this area, this legislation takes an important step toward promoting market stability and avoiding coverage disruptions for businesses and families.”
“Uncanceled” plans: The impact of this legislation, allowing state flexibility, may not really be all that great for another year or two. After the “canceled plan” outcry in late 2013, states were allowed to extend certain non-ACA compliant health plans, and that rule gave the states the option of extending some of these mid-sized business plans as well. That means they would not have been transitioned into the small group market immediately in 2016 anyway.
SHOP exchange: If the incorporation of mid-sized firms into the small market had not moved ahead, more businesses would have been able – though not required – to use the Small Business Health Options Program (SHOP) exchanges. These have received less attention than the exchanges for individuals and families, and they have not worked well nor caught on widely with employers. It’s possible that a larger pool of eligible employers could give them a needed jolt and help them function better. But that’s not a sure thing, and it wasn’t enough to cancel out Congress’s concerns about the possible premium shocks.
For a deeper look at the regulation and operation of the small group markets, see this Health Affairs blog post by Tim Jost. For insight into how small businesses are responding to the changed health care market, see this brief from the RWJF/Georgetown University Health Policy Institute.