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PACE Act Update

 October 9 2015     Shelly Hodges-Konys and David Anthony

On October 7, 2015, President Obama signed the Protecting Affordable Coverage for Employees (PACE) Act. The PACE Act amends the definition of “small employer” under the Affordable Care Act (ACA) allowing states to continue to define a “small employer” as one with 50 or fewer employees for purposes of insurance rating. The new law gives states the option to expand the definition of “small employer” as one with 51 to 99 employees. The ACA originally required states to expand the definition of “small employer” to include those employers with 51 to 99 employees beginning in 2016.

In absence of the PACE Act’s passage, all employers with 51 to 99 employees would have automatically been considered “small employers” for purposes of insurance rating. This means that insurers would have been required to comply with community rating rules causing many employers to experience significant premium increases. In preparation for the ACA’s expanded definition of “small employer”, some states had already enacted legislation to expand the definition of small employer while others took a ‘wait and see approach’.

As a result, many insurers took steps to change their rating methodology and plans filed with state departments of insurance. We are in communication with our insurance partners and state legislators to understand the full impact of this legislation for our clients. We do not anticipate any immediate impact to clients who chose to continue current plans through “grandmothering.” HORAN will continue to provide updates on this issue and how it impacts clients moving forward.


The information contained in this document is informational only and is not intended as, nor should it be construed as, legal or accounting advice. Neither HORAN nor its consultants provide legal, tax nor accounting advice of any kind. We make no legal representation nor do we take legal responsibility of any kind regarding regulatory compliance. Please consult your counsel for a definitive interpretation of current statute and regulation and their impact on you and your organization.