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Why some small-group health submarkets may implode

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Implementers of the Patient Protection and Affordable Care Act of 2010 (PPACA) are preparing to change how regulators define “small group,” or “small employer,” for purposes of applying PPACA coverage requirements.

See also: PPACA: How Small is Small?

State insurance regulators are joining with business groups to back the ”Protecting Affordable Coverage for Employees Act” bill. Sen. Tim Scott, R-S.C., is the lead sponsor for the Senate version, S. 1099, and Rep. Brett Guthrie, R-Ky., is the lead sponsor for the companion bill, H.R. 1624.

Monica Lindeen, the president of the National Association of Insurance Commissioners (NAIC), and other NAIC officers have sent Congress a letter expressing support for the bills

The U.S. Chamber of Commerce has also written to Congress to support the bills.

See also: Nebraska Defines “Small”

Defenders of the current Obama administration strategy for applying the PPACA definition rules, which are given in PPACA Section 1304(b), say that the U.S. Department of Health and Human Services (HHS) has already given insurers, employers and regulators years to get used to Section 1304(b); that making U.S. health insurance rules more uniform will eventually make the U.S. health insurance system more efficient; and that applying uniform rules will help ensure that people in one part of the country get the same protections that people in other parts of the country get.

Backers of the group definition bills argue that the small-group markets in many states have had trouble handling the PPACA provisions already in effect, and that states need as much flexibility as possible to prevent future problems.

See also: PPACA small-group exchange program fights for life

For a look at some of the details from the NAIC and Chamber of Commerce letters, read on.

On a dial, 2015 changes to 2016

1. Federal PPACA rules that now apply to employers with 1 to 50 employees are supposed to apply to employers with 1 to 100 employees starting Jan. 1, 2016.

PPACA and HHS regulators have let states apply their own local definitions of small group up until New Year’s Day next year.

HHS has extended the time the insurance community has to prepare for a national shift to the 1-to-100 definition by stating that it will not enforce some small-group market regulations for existing plans if the plans are renewed on or before Oct. 1, 2016. States and the District of Columbia can choose whether or not to use the transition option.

The NAIC officials write in their letter in support of the group definition bills that most jurisdictions expect to use the transition option, and that the transition option will effectively stave off the new regulations until Oct. 1, 2017.

“Nevertheless, we believe a more comprehensive fix provided by this legislation is necessary,” the NAIC officials write.

See also: Stop-loss war flares in New York state


2. The definition change could apply PPACA rules that apply to the small-group market, such as the requirement that plans cover the essential health benefits package, to employers with 51 to 100 employees.

PPACA exempts “large groups” from many PPACA rules that apply to individual policies and small-group policies, such as the requirement that small-group plans cover a package of essential health benefits (EHB) that includes mental health benefits.

Fully implementing the small-group definition expansion would mean that, in states that have defined small employers as employers with 1 to 50 employees, bigger small groups would suddenly have to comply with the EHB package mandates and many other small-group plan mandates, such as the PPACA coverage pricing rules and the PPACA small-group minimum loss ration requirement, officials say.

“Some employers will lose their current coverage,” officials write. “Some will have fewer coverage options, and some will have their health insurance costs increase. The impact will vary by state, which is why defining the small group market should be left to the states.”

See also: Midsize firms can keep their plans, too

Squashed tomato

3. The bigger small employers would have to comply with both the PPACA coverage mandate and the PPACA small-group plan benefit design mandates.

R. Bruce Josten, an executive vice president at the Chamber of Commerce, notes in his letter that PPACA is set to require employers with 51 to 100 employees to comply with the PPACA group coverage mandate rules starting in 2016.

If HHS starts applying the PPACA small-group rules to employers with 51 to 100 employees, then the bigger small employers will have to comply with the same “shared responsibility” rules imposed on bigger employers, and, at the same time, face tight limits on their ability to adjust benefits to hold down costs, Josten writes.

The group definition legislation “would mitigate premium increases and allow employees to keep their existing plans,” Josten writes. 

See also: IRS drafts large-group minimum value rules