This week, both houses of Congress passed small-group expansion bills and the legislation is now headed for the White House for President Obama’s consideration. The legislation will allow states to determine their own definition for the size of a small group (generally 1-50 or 2-50 employees) instead of being forced into a single nationwide standard of up to and including 100 employees. On Monday, the House of Representatives passed H.R. 1624by a voice vote and, late yesterday afternoon, the Senate passed the House bill through the unanimous-consent process. The White House has not yet indicated its intent with the legislation and has not released a Statement of Administration Policy.
This legislative effort will have meaningful effects for small and medium-size employers all over the country that could otherwise be faced with premium increases of an average of 18% next year, due solely from this expansion. Many of these midsize employers would no longer be able to keep their existing plans, which could cause some to drop coverage altogether, pushing their employees to the marketplace for coverage. Healthier groups would have less of an incentive to maintain coverage, which could create a death spiral in the new small-group market, where only less healthy, more-expensive-to-insure groups maintain coverage, and drive up the rates on all groups. However, this legislation specifically only addresses the small-group expansion as it relates to whether midsize companies are defined as small or large employers. It does not alter whether an employer that is an applicable large employer (ALE) would be subject to the employer shared responsibility requirements (“employer mandate”) or other provisions of the law.
While the Administration offered transition relief for states and existing groups, and the vast majority of states agreed to the transition relief, the transition period is only temporary and eventually these larger small groups would be impacted by the new small-group rules. This includes being forced to comply with modified community rating rules, actuarial value, cost-sharing, essential health benefit requirements and other rating rules. The small-group legislation passed by Congress this week would bring lasting relief for the midsize employers in states that decide to keep their existing small-group definitions, and employees that might otherwise lose their coverage and be forced into the marketplace would be able to maintain their existing coverage. The legislative change also means that new midsize groups will not be forced into the small-group market next year as originally planned.
NAHU has been a leading advocate for changes to the small-group expansion section of the ACA, along with its partners in the 50-100 Coalition. Just before Capitol Conference in February, NAHU joined more than a dozen other industry groups in askingthe Administration for a two-year delay in the small-group transition to give employers time to adjust to the employer mandate and other market reforms. The following month, Representatives Brett Guthrie (R-KY-2) and Tony Cardenas (D-CA-29) introduced H.R. 1624, which was followed in April by a Senate companion bill introduced by Senators Tim Scott (R-SC) and Jeanne Shaheen (D-NH).
Over the summer, we ramped up our direct lobbying and grassroots presence on the issue (with nearly 20,000 messages sent to Congress), which helped start the process of hotliningthe bill just before the August recess and put pressure on Congress to pass the bills when they returned in September. The legislation faced challenges in both chambers, including in the House, when the initial planned vote was cancelled due to disagreements over what to do with the savings from the bill, and later in the Senate, when several senators placed anonymous holdson the bill, preventing it from being considered by unanimous consent and potentially killing the legislation by delaying the fast-track process. As the legislation has a definitive “sell by” date to give stakeholders enough time to enact change in advance of the new plan year taking effect, these holds could have resulted in the bill going through the traditional and lengthy legislative process, and any effort thereafter would have been too late to have a meaningful effect on employers. However, these holds were released and by Thursday afternoon the bill cleared both houses of Congress.
The next step is for the White House to either sign the bill into law or to veto it. As the Administration has not issued a Statement of Administration Policy, we do not have confirmation of which way they are leaning. However, given the widespread bipartisan support of both the House and Senate bills, and the potential for a veto override, we are confident that this legislation will be fully enacted. Following this, there will effectively be 51 independent decisions to be made by each state and the District of Columbia through their state insurance commissions or state legislatures, depending on the state. Some states are less likely to retain their existing small-group definitions, such as Washington, where Insurance Commissioner Mike Kreidler indicated at a hearing last month that he intended to expand small groups to 100 employees. Once each state makes its decision, insurers and their actuaries will need a quick turnaround to release new plan options, and employers and their brokers will need to review these plans and make a selection in time for the new plan year.
The effort to pass this legislation was an enormous undertaking and we are very proud to have taken a leading advocacy role in it. While we can’t claim victory until the law is fully enacted by the Administration, we want to thank everyone for their efforts in making this possible, especially those of you who sent the nearly 20,000 messages to Congress on this issue, not to mention the phone calls, tweets and in-person meetings and pig roasts to talk this issue over with your legislators. We also want to thank the 235 members of the House and 47 senators who took leadership on this issue by sponsoring or co-sponsoring these bills and shepherding them through the legislative process. Last night, we sent out an Operation Shoutasking you to take action and send your legislators a thank-you note if they were among the bill sponsors or cosponsors. Finally, if you happen to see your representative and they were one of our supporters on this issue, be sure to thank them for their leadership and what it will mean for your employer clients and their employees.