Earlier this month, President Barak Obama signed the “Protecting Affordable Coverage for Employees Act of 2015,” otherwise known as the PACE Act. The new law redefines the term “small” employers with respect to determining whether employers must provide health coverage for their employees within the Affordable Care Act.

Under most state laws, employers with one to 50 employees are considered small employers, while employers with 51 to 100 employees are considered large employers. The Affordable Care Act deviated from this standard by categorizing employers with 51 to 100 employees as small employers. However, prior January 1, 2016, states had the option to continue to treat them as large employers.

The definition is important for Affordable Care Act compliance because large and small employers are treated very differently under the Affordable Care Act. Health insurance offered in the small group market must meet certain requirements that do not apply to the large group market, including the requirement to cover ten “essential health benefits” and provide plans that plans that fall into the actuarial value levels (platinum, gold, silver, and bronze) established by the Affordable Care Act. These requirements, along with several others, have made purchasing insurance more costly for small employers.

The PACE Act curtails the expansion of the definition of “small employer” under the Affordable Care Act. Instead, it authorizes states to define the small employer market within their jurisdiction for employers of up to 100 individuals. According to the Congressional Budget Office, the new law will result in a net reduction in health premiums for insurance purchased by firms with between 51 and 100 employees.

Most states, including New Jersey, elected to delay the expansion of the definition of “small employer” through 2016. Accordingly, the state is expected to continue to define small employers as those with less than 50 workers. The path forward for states like New York, which already adopted the expanded definition, is less clear.