Yesterday, President Obama signed the Protecting Affordable Coverage for Employees (PACE) Act. In an unusual bi-partisan move, Congress passed the Act, which blocks the scheduled expansion of the definition of “small employer” under the Affordable Care Act (ACA). According to U.S. Senate Majority Leader Mitch McConnell, R-Ky., “The law will “protect small and medium-size businesses that provide health care to their employees.” Under the Act, the federal definition of “small employer” for the purposes of determining which employers may use the ACA’s small and large group markets would remain at 50 employees or fewer, preventing the scheduled change to bring employers with up to 100 employees into the small group market, effective January 1, 2016. As a reminder, the ACA requires that small group health plans meet certain minimum requirements, such as coverage of core health services, called “essential health benefits,” including emergency, hospital and preventative care. According to the Act’s sponsor, these requirements limit choices for coverage available in the small group market, and employees newly brought in under the small group definition would likely have seen their health coverage disrupted. Employers and employees would also likely pay  higher premiums. Please note that states that have their own health marketplaces may, but are not required to, apply this change to their own exchanges.  

This may be the first of many changes as the Congressional Republicans try to repeal many of the ACA’s more contentious provisions, such as employer and individual mandates, taxes on medical devices and the “Cadillac”  tax on high cost employer health plans. Bipartisan support is growing for rolling back ACA provisions, especially the Cadillac Tax. Stay tuned for further updates!

For more information on the effect that this decision may have on your employee benefit plans, please contact your Executive Compensation and Employee Benefits Counsel at Smith, Gambrell & Russell, LLP.   

This client alert is intended to inform clients and other interested parties about legal matters of current interest and is not intended as legal advice.