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Tuesday, 27 October 2015 20:47

Congress Passes PACE Act – How Does it Impact You?

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The definition of a “Small Group” in Colorado for insurance purposes has long been considered to be a group employing 50 or less individuals.  The Affordable Care Act originally redefined a Small Group as a group with 100 or less individuals, and also proposed implementing a new rating mechanism for all small groups in 2016.  

The new age-banded rating structure requires that rates be determined upon each member’s exact age.  This has many companies, primarily those in the 51-100 space, struggling to prepare for new administrative complexities that they are not used to since they have always been composite-rated.  

On October 7, 2015, the federal Protecting Affordable Coverage for Employees (PACE) Act was enacted into law after much debate and lobbying in Congress. This bill re-set the definition of a small group under the ACA back to 2-50, and allows the states to extend the small employer definition up to 100 employees if they choose. 

Colorado and a few other states (CA, MD, NY, VA and VT) have already passed legislation to expand the small employer definition up to 100 employees for 2016. The PACE Act may have some of these states re-evaluating the guidance and whether it is worth the time and money to change the small group definition.  As it stands today, we do not expect the state of Colorado to change their current position, which defines Colorado Small Group as a group of under 100 employees.  Much work has already been done at the carrier level to accommodate the new definition, and it may be too late in the year for them to change their stance.

As having a different rate for every employee can be very challenging, we have two key suggestions.  First, if you are becoming subject to age-banded rates for the first time, we highly recommend using an online enrollment tool if you don’t already.  This enables you to load all the rates in advance once, so that each new employee comes on and the system has already priced out what the rates will be depending on their exact situation.

Secondly, small groups subject to the new rating structure can still create composite rates for their employees if they so choose.  The benefit is to be able to communicate the same rate to all employees regardless of age, based on their tier of coverage.  We can help you estimate what adequate composite rates would be for your group.  

These estimated composite rates are used only for establishing your employer/employee contributions and will not affect what you see on your insurance company bill.  Thus, it’s important that groups choosing this route be aware that they are taking a risk of not collecting enough premium to balance out at the end of the year should enrollment fluctuate from what was anticipated when the composite rate estimates were established.   Companies using composite rates would want to revisit them each year with the changes in enrollment over the last 12 months. Groups with high employee turnover or contract employees may not want to use composite rates because of this uncertainty.

Finally, consider a partially self funded plan, which enables you to keep your composite rates indefinitely.  Read more here.

This continues to be a hot topic and we’ll monitor the news for additional guidance in Colorado!This email address is being protected from spambots. You need JavaScript enabled to view it. or give us a call with any questions.

Read 5879 times Last modified on Monday, 14 September 2020 20:03
Tonya Young

Tonya is our Senior Account Manager and brings eleven years of prior insurance company expertise to Fall River, having worked at Anthem Blue Cross and Great-West Healthcare (now part of CIGNA). Tonya holds a Bachelor of Science in Psychology from Texas A&M University. Originally from Minnesota, she loves the Colorado outdoors and enjoys family time with her young daughter.