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Small Employers Benefit from Recent Change to Affordable Care Act


On April 1, 2014, President Obama signed the Protecting Access to Medicare Act of 2014 (PAMA) into law. Generally, the PAMA relates to Medicare and temporarily postponing cuts to physician reimbursements. However, section 213 of the PAMA abolishes the limitation on deductibles for employer-sponsored health plans in the small-group market.1 Section 213 repealed section 1302(c)(2) of the Affordable Care Act (ACA), which mandated that deductibles offered in small employer-sponsored health plans could not exceed $2,000 for self-only coverage, or $4,000 for other coverages. Small employers were forced to change their plans to reflect these deductible limits, effective January 1, 2014. To do so, many small employers were required to terminate their existing plans and adopt new plans. These new plans often resulted in higher premiums because of the reduced deductible limits; whereas previous plans allowed for higher deductibles in exchange for lower premiums paid by employers and employees. The deductible limits also affected small employers who offered plans with higher deductibles coupled with health reimbursement accounts (HRAs) that permitted partial deductible reimbursements for their employees.

This amendment applies as if it were included in the original ACA law, so it retroactively takes effect for plans on January 1, 2014. Section 213 may not offer much help to small employers who have already instituted new plans setting their 2014 deductible limits, but it will offer flexibility going forward that many small employers previously could not enjoy under the ACA. Now, small employers may offer higher deductibles in tandem with flexible compensation options, such as HRAs, health savings accounts (HSAs) and flexible spending accounts (FSAs), without the hindrance of the previous deductible limitations.

1Small-group health plans are plans generally sponsored by an employer with fewer than fifty full-time or full-time equivalent (FTE) employees.