As an expert on employee benefits at the RJF Agencies in Brooklyn Park, Mary Setter helps insurance clients understand the Patient Protection and Affordable Care Act. While the act faced tough question from U.S. Supreme Court justices last week, we talked with Setter to learn how companies are preparing for the health care reform law -- and its costs.

QIf upheld by the Supreme Court, the new law will require employers to provide employee health plans or pay a penalty. Are corporate clients anxious about the law?

AThere is a fair amount of confusion about it. It takes a lot of education to continually reinforce what the requirements are surrounding the law and how it will affect them.

QUnder the law, small businesses with fewer than 50 workers won't face any penalties for not buying health plans for workers. So, do they care about this law?

AThe smallest businesses have just as much need for clarity as the large employer. And maybe even more. They are not subject to the penalties for not having a health plan. But [if they offer a plan] they [must] comply with some of these other requirements of the law. As an example -- the no preexisting conditions limitation; preventative care [coverage] at 100 percent. And they have to comply with the minimum coverage levels required for large groups, which ultimately could increase their cost.

QHow do Fortune 500 employers view this law?

AMost of these employers have had their [health] plans in place for a very long time. They are going to continue to do these things going forward. It helps attract and retain employees, helps them be competitive in the marketplace and also [builds] employee morale. So we don't see a lot of changes in the Fortune 500 realm.

QWhat about for your middle-market clients, those with 50 to 2,000 workers?

ATheir concerns revolve around determining, "Does it make sense for us to continue our [health] plan? Do we want to drop our plan? If we drop our plan, what would the [government] penalties look like? And what kind of impact would it have on our employees?"

QAre they leaning in any one direction?

AThe majority of employers we work with have gone back to their original plans. They had their [health] plans for a reason, when there wasn't a compliance requirement. And they are still going to do that.

QWhat are the costs if a company does not offer health insurance in 2014?

AIf you have 50 or more workers or full-time equivalents and decide not to offer a plan, there are a couple of different penalties that could be imposed. [One] would be $2,000 per employee per year. And [there are other penalties] if any employee qualifies for a subsidy to join one of the [government's health care] exchanges.

QHow do the subsidies work? And how will the government apply penalties to employers that refuse to offer workers health insurance?

AThese exchanges will have a subsidy available for workers who qualify based on income. [But] if workers qualify for this subsidy, then the employer will be imposed a penalty of $3,000 for each person that qualifies. ... So the penalty goes from $2,000 to $3,000 per person [if the employee qualifies for a subsidy].

QAre there other rules?

AThe law says the first 30 employees are excluded from any penalties. So, say a 100-employee company [does not offer a health plan]. They subtract the first 30 employees, and [pay penalties on] the 70 employees who are left.

QSo employers' costs vary depending on number of workers and whether they offer a health plan?

AExactly. We compare [potential penalties] to what their premiums would be if they kept their plan in place. We're also going to ask, "If you drop your plan, what are you going to do for the well-being of your employees?" Morale is a very large [factor] in making these decisions.

QIf an employer decides it can't afford to provide a health plan, what might restore morale to workers who now must buy insurance on their own?

ASay, we as an employer give $10,000 a year to each employee for their medical plan. And now we are not going to do that. Are we going to take some portion of that $10,000 in benefits and maybe make it available as income to employees?

QIs it that simple?

AWell, on top of that, you have payroll taxes as an employer. And the employee [also faces] taxes as their tax brackets will change. So it requires going through all those scenarios.

QOK, so what happens if an employer decides to keep their health plan. Will their costs go up?

AWhen the law goes into effect in 2014, nobody can be denied coverage. And there cannot be any underwriting exclusions for preexisting [conditions] ... no lifetime limits on insurance. So it's hard to imagine how costs would not increase when all of those components are there.

Dee DePass • 612-673-7725