Tom Kane, executive vice president with Stephens Inc., plunks a 2,000-page stack of papers onto the podium and tells the audience that this is the recently passed Patient Protection and Affordable Care Act, the federal government's healthcare reforms that they will have to follow if they want to continue providing insurance to their employees. And then he tells them it's just a start.

 

"As intimidating as this is, and overwhelming, I want you to imagine for a minute a stack of paper that goes all the way to the ceiling, 10 to 15 times bigger than this," he said. "That's what we expect to see over the course of the next seven to eight years as this law is fully implemented. Between Health and Human Services, Department of Treasury, Department of Labor, and the IRS, there is a lot of work to be done. This is indeed a very big deal."

 

It's a very big deal to the roomful of attendees in Little Rock's Capital Hotel. This meeting on June 15 is the first of several such events Stephens is helping host across the state for employers, most of them Stephens Insurance clients who insure their employees either through third parties or through self insurance funds. Seminars also are being conducted for employer groups such as the Arkansas Trucking Association.

 

Under the act, employers must offer plans that are qualified and affordable, meaning they provide essential benefits with the employee's share equaling no more than 9.5 percent of household income costs.

 

The problem? Employers won't have a reliable way of determining their employees' household incomes as they are crafting their plans.

 

Meanwhile, they will be competing with statewide insurance exchanges set up by the act that will have access to that information. John Denery, Stephens executive vice president, described these exchanges as "Travelocity for health insurance" where employees can pick a plan design and receive quotes from providers.

 

If employees opt out of their employers' plan and choose the exchange, then employers whose plans are not deemed qualified and affordable could pay for vouchers to subsidize the employee's decision. And if employers choose not to offer insurance at all, they pay a $2,000 fine per employee, minus the first 30 employees. Plus, Kane said, they run the risk of losing key talent who consider employer-provided health insurance an essential benefit.

 

In an interview afterwards, Kane said the biggest surprise for many employers is their potential to be penalized even if they are trying to do the right thing. "I think you hear that kind of a gasp when they realize that they have that exposure," he said, "and there's very little they can do to control it unless they look at their plan and they say, 'How can we build our plan, pay more of the premium for our employees so they're not eligible for subsidies, or what else can we do to avoid that?'"

 

The act introduces major changes to the healthcare system over the next several years, including the removal of lifetime limits for coverage. The big changes come in 2014, including the exchanges, fines assessed against Americans who don't buy health coverage, and the abolition of using pre-existing conditions to deny coverage.

 

Another provision that takes effect in 2014: Employees are considered "full-time," and thus eligible for employer-provided health insurance, if they work 30 hours per week rather than the current 35 hours. Moreover, that 30 hours represents a monthly average, which will affect employers such as retailers who hire seasonally. An employee who averages 30 hours a week during December is eligible for insurance, according to Denery. If they fall below 30 hours the next month, they are eligible for COBRA benefits.

 

Denery said that because employers will be under greater financial and regulatory pressures, they will have a greater responsibility proactively to control their healthcare costs. For example, he explained that over-the-counter medications won't be eligible expenses in certain circumstances unless they are prescribed by a physician. That means employers should encourage employees to choose eligible medications such as a prescribed Prilosec OTC over the similar but much more expensive Nexium. Meanwhile, employers will need to design plans so that younger, healthier employees don't opt out for the exchanges, leaving them covering an older and/or sicker population.

 

Kane said in the interview that Stephens doesn't expect the law to be repealed, but many aspects will change and many issues will need to be clarified before major provisions take effect in 2014. "We're telling our clients that they need to start thinking about the position that they want to take with regard to their health plan," he said. "Do they want to take an aggressive position and build a health plan that competes with the exchange, or are they willing to default to the exchange and just pay the fines? And so we're asking them to kind of start thinking about that now."