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Last week, Congress passed, and the President signed into law, the PACE Act. The Act repeals a portion of the Affordable Care Act (“ACA”) relating to the definition of “small” groups. Prior to the ACA, most states defined a small group as one that employed between 2 and 50 employees. The ACA increased the threshold to between 2 and 100 employees. This change was not viewed as favorable, in that it subjected a large number of small-to-mid-sized employers into a much more expensive insurance marketing via community rating and other requirements that arose out of the ACA’s insurance changes. The PACE Act repeals this expansion, however it does give the states the ability to expand the market if they so choose. Note that the PACE Act does not change the definition of an applicable large employer for purposes of the ACA’s employer mandate – that remains the same as before, and groups that average 50 or more full-time equivalent employees will be subject to the employer mandate.

On Friday, October 9, the Illinois Department of Insurance endorsed this change, electing to retain the 2 to 50 market definition of a small group. However, the timing of this change is too late for plans that renew in the 1st quarter of 2016. The state has invited carriers to submit new rates for the 2nd quarter of 2016, but it remains to be seen whether carriers will follow through and submit changes.

On a broader basis, other states will need to act on different levels if they choose to retain the 2 to 50 definition. California, for instance, has already passed a pair of laws that expand the small group market to 2 to 100, and would have to act very quickly indeed to pass another law if they decide to revert back to the 2 to 50 market.

Employers who took advantage of an early renewal in 2015 in order to avoid community rating are not affected by this change and do not have to take any additional actions as a result of the PACE Act. Those groups which did not execute an early renewal will no longer need to pursue that strategy, as they will likely be able to renew their existing plans without fear of moving into a community rating structure. 

Each state will need to respond to the PACE Act changes, and once they do, insurance carriers will have to do the same, so the situation on a national level will remain somewhat fluid for the next few months. Assurance will continue to monitor the situation and will communicate any pertinent information as necessary.

PCORI Fee Updated

The IRS has announced that the annual fee to fund the Patient Centered Outcomes Research Institute (PCORI) has increased to $2.17 per year for each covered life. This fee applies to plans that renew on or after October 1, 2015 and prior to October 1, 2016.

Transitional Reinsurance Fee Contribution Web Form Available

HHS has announced that the web form for submitting the annual 2015 enrollment count and for remitting the contribution amount for the ACA’s transitional reinsurance program is now available. The form can be found at https://www.pay.gov/public/form/start/70746962.

Subsidy Calculation Update

Lastly, the IRS has revised the index it uses to determine whether an individual is eligible for a taxpayer subsidy if they purchase coverage through the Marketplace. The new threshold is 9.66% of the employee’s household income – that is, if coverage costs the individual more than 9.66% of their household income, they will be eligible for a subsidy. NOTE: This does not affect the employer’s affordability calculation under the ACA’s employer mandate. Employers are still required to make coverage affordable through using one of three safe harbors that limit the employee’s contribution to no more than 9.5% of the employee’s W-2 Box 1 income for single coverage.