Repeal of Small Business Provision of the ACA Creates Natural Experiment in States

By Sabrina Corlette, Ashley Williams and Kevin Lucia

A recent, rare act of bipartisan unity has led to a change in the Affordable Care Act (ACA) that could impact the affordability and availability of health plans for small- and mid-sized employers. As originally enacted, the ACA expanded the definition of small employer from one with 50 or fewer employees to one with 100 or fewer, starting in 2016. However, state regulators, as well as insurer and business interests, raised various concerns about the expanded definition, such as the prospect of big premium rate increases for some small businesses, and the risk that businesses with young and healthy workers would self-fund their plans. In response, Congress passed the Protecting Affordable Coverage for Employees Act (PACE Act) in the fall of 2015. The PACE Act generally defines a small employer as having 1 to 50 employees, but allows states to elect to extend the definition of small employer to 100 employees.

States are often referred to as the laboratories of democracy. In this case, because the PACE Act has given them flexibility to set the size of their small-group markets, their decisions can help test whether  concerns about price increases and self-funding will come to fruition.

As part of an ongoing project monitoring state action on private insurance reforms for the Commonwealth Fund, Georgetown researchers examined action in the states to either expand their small business insurance market to 100, or keep it at 50. Their complete analysis can be found here.

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