ACA change spares midsize businesses from rate increases


Last week President Barack Obama signed a rare change to the Affordable Care Act (ACA), stopping a federal mandate that insurers and business associations say would have raised insurance premiums on many businesses.

The Protecting Affordable Coverage for Employees (PACE) Act stopped the requirement that states redefine small employers as businesses having up to 100 employees. Many states define small businesses as having 50 or fewer employees.

The PACE Act received strong bipartisan support in Congress, with U.S. Sen. Tim Scott (R-S.C.) joining on as one of the main Senate sponsors of the bill.

“With the PACE Act quickly signed into law, we have taken a great step forward in protecting small and midsize businesses from the harmful effects of Obamacare,” Scott said in a statement.


Scott said he is still “committed to a full repeal of the health care law, and will keep working to find solutions that put doctors and patients in charge – not the federal government.”

Insurers of small employers must provide 10 essential health benefits, whereas large group and self-insured plans do not have to offer those benefits. Small group insurers also have strict community rating rules, which require underwriters to only take into account age, geographic location, family composition and tobacco use when setting rates.

States still have the option to redefine small businesses to include up to 100 employees.

Without the change to the ACA, as many as 80 percent of businesses with 51-100 employees could have seen insurance rate increases, said Howard Einstein, a principal at Rosenfeld Einstein/Marsh & McLennan Agency in Greenville.

Einstein said many midsize businesses didn’t realize they would be affected by the change. “Most of those groups were going to get clobbered and have humongous rate increases,” he said.

To delay the rate increases, insurance companies were offering early renewal options that would postpone the new rates until 2017.

U.S. Sen. Jeanne Shaheen (D-N.H.), another of the bill’s main sponsors, said in a statement, “I’m very pleased that, in this instance, Congress rose above the partisan squabbling to make this improvement to the health care reform bill, and I hope it’s a good omen for further cooperation.”

One of those further reforms could be eliminating the controversial excise tax – also known as the Cadillac tax – on high-cost health plans.

The tax has come under increased criticism lately from Democrats. Democratic presidential candidate Hillary Clinton made news last month when she came out against the tax. Her Democratic rival U.S. Sen. Bernie Sanders (D-N.Y.) is also against the tax.

Einstein said the tax punishes people with a high number of claims or with good benefits. However, repealing the Cadillac tax could be difficult because it is one of the main ways to fund other provisions in the ACA, he said.



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