Obama Signs Bill To Stop ACA’s New Definition of Small Businesses

On Wednesday, President Obama signed into law legislation (HB 1624) that stops an Affordable Care Act provision that would have changed the definition of "small employers" from taking effect, the AP/San Francisco Chronicle reports.

The bipartisan effort marks the first time Democrats and Republicans have come together to alter the ACA (AP/San Francisco Chronicle, 10/7).

Background

Under the ACA, small businesses must offer employees health plans that meet the law's essential benefits requirements. The ACA provision would have defined 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 that would have fallen into the new small business definition would have had to comply with the ACA's requirements on employee health plans and enter the small-group insurance market as of Jan. 1, 2016. The change could have forced some companies to offer more generous benefits than they do now. In addition, the change would have meant insurers could 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.

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 predicted the change could have "result[ed] in significant premium-rate changes for some groups," especially among employers with relatively young and healthy employees (California Healthline, 9/21).

Both the House and Senate last week voted unanimously to pass the bill (California Healthline, 10/2).

While the new law now stops the change from taking effect, states could still choose to expand the definition of a small business on their own (California Healthline, 9/21).