The expansion of the definition of a small group plan from 50 employees to 100 employees is a transition that we’ve all been tackling. Most impacted are employers in the 50-99 employee range who currently participate in the large group market but face a potential squeeze into the small group market – and small group rates – come 2016. Fortunately, we now have a bit more clarity on how employer size will be determined in California for purposes of small group market eligibility.

Last month, Governor Brown signed into law SB125, which sets forth the definition of a small employer for plan years beginning on or after January 1, 2016.

To determine employer size, full-time employees and full-time equivalent employees will be counted. This is beneficial for two reasons.

  1. First, it allows employers to count non-full-time employees, which has the potential to bring more employers into the definition of a large employer and remain in the large group market.
  2. Second, the definition aligns with the counting methodology set forth under the Affordable Care Act to determine employer size for purposes of the employer mandate. This allows us to keep calculations consistent.

Remember, pursuant to the ACA, the prior calendar year’s employment numbers are used to determine employer size in the present year. Thus, to determine employer size in 2016 for purposes of both the employer mandate and the California small group market, employment numbers in all 12 months of 2015 will be used.