Support Grows To Stop ACA’s New Definition of Small Business

An Affordable Care Act provision that changes the definition of a "small employer" has garnered bipartisan opposition in Congress, the New York Times reports.

Background

Under the ACA, small businesses must offer employees health plans that meet the law's essential benefits requirements. A provision in the law defines a small business as one with 100 or fewer employees, whereas most states define a small business as one with 50 or fewer employees.

Companies falling into the new small business definition will have to comply with the ACA's requirements on employee health plans and enter the small-group insurance market as of Jan. 1, 2016. The companies could opt to purchase coverage through the small business exchanges, known as the Small Business Health Options Program exchanges, created under the ACA. Companies could end up having to offer more generous benefits than they do now, according to the Times.

In addition, the change will mean that insurers can no longer set certain premiums for companies based on the reclassified businesses' sizes, industries or claims histories, which are typically used to determine premium rates for small employers.

According to the Times, the definition change was included in the law because some believed that reclassifying small businesses would bring millions of new customers into the insurance market and stabilize the industry for small employers. However, the American Academy of Actuaries predicts the change could "result in significant premium-rate changes for some groups," especially among employers with relatively young and healthy employees.

Bipartisan Support for Scuttling New Definition

In the House, 229 lawmakers, including 43 Democrats, have endorsed legislation to keep the change from taking effect. Forty-three senators, including 10 Democrats, also support allowing states to use the current definition. According to Sen. Tim Scott (R-S.C.), who is the lead sponsor of the Senate version of the legislation, the bill would "ensure that small and midsize businesses are not faced with drastic premium increases as a result of the" ACA.

According to the Times, some industry and business trade groups have also expressed support for such legislation, including:

• America's Health Insurance Plans;
• The Blue Cross and Blue Shield Association;
• The National Federation of Independent Business; and
• The U.S. Chamber of Commerce.

According to Alissa Fox, a senior vice president at BCBSA, Congress needs to address the issue soon because many employers make benefits decisions for the coming year in September and October.

Meanwhile, HHS Secretary Sylvia Mathews Burwell said she is looking into the issue and wants to ensure "a smooth transition to the new requirements." However, the Obama administration has not endorsed or offered any proposals on the issue (Pear, New York Times, 9/20).