States Have Option to Extend Small Employer Definition

November 5, 2015

in Health Care Reform

New legislation (referred to as the “PACE Act”) amends the Affordable Care Act (ACA) to include employers with 51 to 100 employees as large employers for purposes of the health insurance markets. (Note: The definition of applicable large employer under the ACA’s “pay or play” and information reporting provisions has not been changed.)

Under the ACA, health insurance offered in the “small group market” must meet certain market reform requirements that do not apply to the “large group market,” including the requirement to cover essential health benefits. The ACA as originally enacted defines employers with 1 to 100 employees as small employers, but allowed states to treat those with 51 to 100 employees as large employers before January 1, 2016.

The PACE Act generally defines small employers as those with an average of at least 1 but not more than 50 employees on business days during the preceding calendar year, and large employers as those with an average of at least 51 employees on business days during the preceding calendar year. The new law gives states the option to extend the definition of small employer to those who employ an average of at least 1 but not more than 100 employees on business days during the preceding calendar year (and who employ at least 1 employee on the first day of the plan year).

Employers that are affected by the revised definition are advised to contact knowledgeable benefits counsel to determine their specific obligations under the ACA.

Visit our ACA by Year & Company Size section for an overview of the requirements applicable to employers of various sizes.

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