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ACA Small Group Market Rule Repealed

On October 7, 2015, President Obama signed the Protecting Affordable Coverage for Employees (PACE) Act into law. The PACE Act repeals the Affordable Care Act (ACA) requirement that the small group market in every state be expanded to include businesses with 51-100 employees and, instead, gives states the option of expanding their small group markets to include businesses with up to 100 employees.

The expansion of the small group market was expected to have a significant effect on mid-size businesses. These businesses would have been required to buy coverage for employees in the small group market, which is more heavily regulated than the large group market.

This change was expected to increase premiums costs for employers and employees and reduce flexibility in plan design due to added small group market requirements.

Some states have already changed their definition of small group to 100 or fewer employees starting in 2016. It is unclear whether these states will amend their definitions in light of the new law.

Most states are already taking advantage of a transition rule provided by the Department of Health and Human Services that says it will not enforce small group market regulations for mid-size businesses if their policies are renewed by October 1, 2016.

This means that many employers have already been able to delay moving from the large group to the small group market. The PACE Act makes this relief permanent for all employers.

For more in-depth information, read our full Healthcare Reform Legislative Brief.