An ACA Tweak: Miracles Happen

Just when you thought Congress and the White House were officially incapable of agreeing that the days of the week actually end with the letter “y” they come up with a surprise — a tiny sliver of light that penetrates the cynical gloom in which most Americans shroud Congress. Lawmakers today passed legislation that amends the Patient Protection and Affordable Care Act.

Yes, that’s not a misprint. Congress amended the ACA.

It wasn’t a major change, more of a tweak, but a change nonetheless. Specifically, both chambers of Congress passed the Protecting Affordable Coverage for Employees Act (H.R. 1624). The legislation allows states to set the definition of “small group” as opposed to being required to adopt the definition set in the ACA. HR 1624 is on its way to President Barack Obama’s desk for his signature. Given the strong support in Congress (it was passed by unanimous consent in the Senate) I’m optimistic the President will sign HR 1624 into law. And the President did sign HR 1624 on October 7th.  <I’ll update this post when the President acts.

What’s going on here? As far as the substance of the bill is concerned: currently, the small group market covers companies up to 50 full-time equivalents (“FTEs”). Small groups are subject to a host of requirements under the ACA concerning plan design, pricing, medical loss ratio, and more. Large groups (currently defined as companies with 51-or-more FTEs are subject to different regulations. (Full time equivalents is a measure that takes into account part-time employees when calculating a company’s size under the ACA).

On January 1, 2016 the definition of “small group” is changing to include companies with 100-or-fewer FTEs. This is going to result in substantial changes for these companies — more than a few of those changes of the unpleasant variety. Some carriers are averaging 35%-to-40% rate increases in this market segment. A company of 51-to-100 FTEs will find fewer plan options and other limitations at which they are likely to chafe.With the enactment of HR 1624, many companies will now be able to remain in the large group market. (To be fair, there’s some benefits to being considered a small group that these companies may regret missing out on, but overall most brokers I talk to report that their impacted clients would like to avoid entering the small group market).

In practice, HR 1624 doesn’t change the definition of small group under the ACA. It simply allows states to set their own definition: think of it as permitting state preemption of the federal definition.

Consequently, HR 1624 may or may not matter. States may decide to move forward with the redefinition of small group to companies with up to 100 FTEs (California is a state likely to take this position). Your state Association of Health Underwriters chapter will be a good source for learning what your state is doing.

What’s going on here politically is even more interesting. Allowing states to set their own definition of what is a small group is the kind of tweak that’s supposed to happen when Congress passes complex legislation. In the old days after passing something like the ACA, Congress and the Administration would work together to refine the law into something less burdensome and more effective. That’s what HR 1624 does, but getting it this far was no easy task. It took a bipartisan group of lawmakers in Washington (that’s a phrase becoming increasingly rare) and the urging of many business and industry groups like the National Association of Health Underwriters to push the bill over the line.

Which is why, while the substance of the law is significant, what’s most significant is that the law passed Congress at all. The current Congress is not known as a “can-do” group of folks. Getting them to agree on anything meaningful is a Herculean task. That they came together on the Affordable Care Act is newsworthy — they usually prefer to use health care reform to bludgeon one another about the head. For this Congress at this time to make any change to the ACA is remarkable.

The passage of HR 1624 is remarkable, but not unprecedented. Congress, for example, previously removed an onerous provision of the ACA that would have required businesses to issue 1099s to any vendor they spent $600 with in a year. Everyone realized that was silly and they repealed the provision. So enactment of HR 1624 is not unprecedented.

It is, however, welcome and remarkable.