The newly enacted PACE Act offered significant relief to employers with 51 to 99 employees who, under the Patient Protection and Affordable Care Act (ACA), would otherwise have been subject to community rating. Community rating, which affects the small group and individual markets, is a policy by which personal factors used by an insurer to determine premium rates are very limited in scope. Instead, insurers follow instructions from the federal government on age curves, geographical rating, and state reporting to determine premiums. Typically, community rated plans are much more costly, putting these employers at risk for huge rate hikes.
Now that the PACE Act has enabled states to roll back to the previous definition of a small group, UBA conducted a state-by-state survey to see how each state legislature has chosen to define this group. According to UBA analysis, 40 states, or 80 percent, have reverted to the 1 to 50 employee definition; 6 states at this time are still undecided.
States that moved to the 1 to 100 definition are California, Louisiana, New York, Vermont, and Virginia. “Employers with 50 to 100 employees in California, Louisiana, New York, Vermont, and Virginia, are looking at substantial rate increases as a result of their state’s choice to adopt the new small employer definitions,” says Danielle Capilla, Chief Compliance Officer at UBA.
States that reverted to the 1 to 50 employee definition may still have gaps since rate filing, which is required in advance, could have reflected the pre-PACE 1 to 100 employee definition. “For those states that reverted to the 1 to 50 employee definition,” continues Capilla, “employers with 51 to 100 employees may still see rate increases because rate re-filing likely already happened under the previous definition before state legislatures could get back in session to take advantage of the PACE Act and provide protection for this group."
“Rate increases are nothing new in this current health insurance market,” says Les McPhearson, CEO of UBA. “Even without many internal resources, there are very effective ways for employers to manage health care costs.”
Contact a UBA Partner who knows your geographic area, your industry, and the details of the law.
Not sure how your state defines small groups? Request a copy of UBA’s comprehensive State Guide to Small Group Definition.
For comprehensive benchmarking information on health care costs among employers with 51 to 100 employees—including the rate outlook now that the PACE Act has passed and community rating may be avoided for these groups—download UBA’s 2015 Health Plan Survey Executive Summary.