December 2010 - Susman
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Small Group and Large Group Definitions and Differences

The Patient Protection and Affordable Care Act (or health care reform law) established several new standards for private health insurance coverage. As part of these standards, the law established federal definitions of “small employer” and “large employer” for health insurance markets. Previously, states defined these markets.
From now until 2016, states can define the size of small groups:

Small employer can be either 50 and fewer or 100 and fewer.  Beginning in 2016, the definitions in the federal health care reform law will apply:

Small employers are those who had, on average, 1-100 employees in the preceding calendar year and at least one employee on the first day of the plan year. (Note that this means sole proprietors could be considered part of the small group market.)

Large employers are those who had, on average, 101 or more employees in the preceding calendar year and at least one employee on the first day of the plan year.

These definitions are based on full-time equivalent calculation that accounts for both full-time and part-time employees. Full-time seasonal employees who work fewer than 120 days during the year are excluded.  On the surface, the inclusion of group size definitions in the federal health care reform law appears to bring more uniformity to health insurance markets. However, the definitions aren’t applied consistently throughout the law. For example, the medical loss ratio provision of the health care reform law amended the Public Health Service Act – but it didn’t change the existing, conflicting group size definitions in the Public Health Service Act.  In addition, some provisions that set different thresholds consider only full-time employees in the calculation rather than full-time equivalents.

Thanks to our friends at Anthem Blue Cross for this helpful information!