After months of lobbying, the U.S. Congress passed legislation designed to protect a very specific group of small to mid-sized businesses. The new law, a modification of the Affordable Care Act, is intended to prevent some businesses with 51 to 100 employees from increases in health insurance premiums.
President Barack Obama has already signed the Protecting Affordable Coverage for Employees Act into law. The legislation addresses a provision of Obamacare seen by many as particularly onerous to this special group of businesses.
States have defined small businesses as those with 50 or fewer employees. But Obamacare would expand that definition to include companies with up to 100 employees as of Jan 1, 2016.
The change would leave businesses with 51 to 100 employees in a peculiar position.
On one hand, the change reclassifies these businesses from large to small employers. Under the large employer category, they could continue to have their rates set using factors like claims history, industry and location. These are factors that in some cases can lower premiums.
However, as small employers, their rates would be set only by factors such as age, family size, geography, and, outside of California, by tobacco use. So, in this case, these businesses would face much less flexibility in how their insurance premiums were adjusted.
On the other hand, these businesses are not exempt from providing healthcare for their employees under the ACA like businesses with 50 or fewer employees. And they face substantial penalties for failing to do so under Obamacare.
The National Federation of Independent Business, which championed the legislation change with other groups, explains:
“Passage of the PACE Act is an important, hard-won victory for the small business community. If the small-group provision had been implemented as planned on Jan. 1, 2016, small employers across the US with between 51 and 100 workers would have been faced with having to provide workers with health coverage or face steep tax penalties like those large firms face, but would have been defined and regulated like the smallest of employers. Many small businesses would have suffered under this costly Obamacare mandate.”
With the new modification in place, states will be allowed to decide if they want to expand the definition of small business to include these somewhat larger companies.
While the Obama administration has suggested it does not favor the bill, the growing bipartisan support for it could not be ignored.
If the bill had not passed, Kurt Giesa, an actuary at Oliver Wyman, explains that some employers with 51 to 100 employees would have faced premium increases averaging 18 percent in 2016.
Quoted in a New York Times report, Giesa explains:
“Many of the groups receiving such sizable increases would elect to drop their health insurance coverage and either self-fund or not offer any coverage at all.”
In addition to the National Federation of Independent Business, the bill was endorsed by the National Association of Insurance Commissioners, the National Federation of Independent Commissioners, the United States Chamber of Commerce, America’s Health Insurance Plans and the Blue Cross and Blue Shield Association.
Sen. Tim Scott, the Republican co-author of the bill, praised Obama on Thursday in a statement, but added that he is still “committed to a full repeal of the health care law.”
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