PACE Act Signed: Definition of Small Business Group Varies by State

Last week brought another change to the Affordable Care Act.


Health care reform updateThe definition of small business group, which was slated to change to 1-100 employees in 2016, will remain at 1-50 employees nationally. What happens on the state level depends on the state legislatures.  On October 1, 2015, Congress approved legislation to repeal the Affordable Care Act provision, which previously expanded the definition of small business group to 1-100 employees.



Known as the Protecting Affordable Coverage for Employees (PACE) Act, the legislation keeps the small group definition current at 1-50 employees, while giving the states the choice to expand the definition to 100 employees. President Obama signed the bill into law on October 7, 2015.


So now what?

Well, a handful of states, including California, have passed statutes that change the definition of small business group to 1-100 employees effective 2016. Without new California legislation, the expanded definition will hold.

The definition of small business group, as we know it today, in the states where Health Net companies do business is:

  • California state law defines small business group as 1-100 effective January 1, 2016.
  • Arizona will retain its definition of small employer as “an employer who employs at least two but not more than 50 eligible employees on a typical business day during any one calendar year.”
  • Washington and Oregon — both states will maintain the current definition of small group as 1-50 employees.


Note that under the PACE Act, states will default to 50 or fewer employees unless the state takes, or has taken, action to adopt 1-100.


What’s next: Groups of 51-100 in states where the small group definition remains status quo will not have to move to a small group plan. Our Account Management teams will be working with these groups to connect them to right-size coverage for 2016.


Health Net of Arizona, Inc. underwrites benefits for HMO plans, and Health Net Life Insurance Company underwrites benefits for PPO, indemnity plans and for life insurance coverage. Health Net of Arizona, Inc. and Health Net Life Insurance Company are subsidiaries of Health Net, Inc. Health Net is a registered service mark of Health Net, Inc. All rights reserved.

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Susan Peters