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The 2013 Pay or Play Mandate

By  Michael Cloutier Michael Cloutier  on 2013-07-10 06:05:00  |  Featured in  Insurance
Michael Cloutier
Posted By Michael Cloutier
in Insurance
on 2013-07-10 06:05:00

insurance.pay.play.mandate.2013

Many employers will need new integrated healthcare solutions for their employees as of January 2014, when a new mandate from the Internal Revenue Service called “Pay or Play” goes into effect. This government mandate will not only affect employers and employees; it will require healthcare insurance companies to make many changes, as well. Healthcare technology will play a huge role in the transition to a Pay or Play system in the United States, as many companies and organizations look for automated solutions that allow them to play rather than simply pay. So is your organization set up to play, or will it make more sense to forego employee health coverage and simply pay, and what does this mean for insurance companies?

What is Pay or Play?

“Pay or Play” is the common name for the employer shared responsibility provisions in the Affordable Care Act. Now that the IRS and the Department of the Treasury have issued their regulations for the mandate, employers and insurance companies can get a better idea of what it will mean for them on the first day of the coming year. As soon as the provisions go into effect, companies with 50 or more fulltime employees will have two choices: they can “play” by providing fulltime employees and their dependants with affordable health coverage, or they can opt to pay a penalty for not providing affordable healthcare insurance options. Employers will only be required to pay the penalty, however, if at least one of their fulltime employees qualifies for and collects the premium tax credit to use in an insurance exchange to purchase their own coverage.

To Whom Does the Mandate Apply?

Many organizations will be scrambling to find the right healthcare payer solutions for their fulltime employees by the end of the year. This even includes non-profit organizations, tax-exempt organizations and government agencies, including local, tribal, state and federal bodies. Any common law employer that hadn't been providing affordable health coverage to fulltime employees before will need to make sure they are set up to play if they want to avoid the penalties. According to these Affordable Care Act provisions, a fulltime employee is one who works at least 30 hours per week or 130 hours per month. Employers who have at least 50 such employees will be required to provide them with health coverage that is deemed to be affordable and to provide the maximum value according to the federal government, or pay a fee.

There are stipulations, however, regarding what constitutes a “large employer” – while it usually means 50 or more employees, there are exceptions to this rule and special provisions for hours worked outside the United States. According to the provisions of the mandate, hours that an employee works outside of the U.S. do not count toward their fulltime status if their payment qualifies as a foreign source of income for the employee. This will only apply to a small number of employers, though, so most organizations with more than 50 fulltime staff members can expect to pay if they aren’t set up to play the health coverage game.

How Will the Transition Take Place?

Healthcare technology consultants are already hard at work helping a number of organizations meet the new demands of these Affordable Care Act requirements, and many more are expected to seek assistance in setting up their organizations to provide coverage in the near future. Healthcare information consulting firms can help companies and organizations determine how many of their employees are considered fulltime and whether those employees might be able to take advantage of the federal premium tax credits as of 2014. Companies that want to avoid paying the penalties will need to begin providing these employees with affordable health insurance. The penalty ranges from $2,000 to $3,000 per employee for organizations that provide no coverage options, or unaffordable coverage options, depending on stipulations set up by the Internal Revenue Service and Department of the Treasury.

It will be a challenge for employers and healthcare providers to make this transition, but with efficient healthcare technology and the assistance of dedicated consultants, most organizations should be able to take the new mandate in stride.

Point of View in Consumer Centricity
Michael Cloutier

Michael Cloutier

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Michael Cloutier, Vice President and leader of Paragon’s Insurance Practice, is responsible for providing consulting and systems integration services to insurance firms that specialize in life, annuity, property and casualty, reinsurance and health. Mr. Cloutier has over 20 years of expertise in directing business transformation, customer relationship management and enterprise systems integration initiatives for clients in the financial services and insurance industries. As leader of the Insurance Solutions Practice, Mr. Cloutier is responsible for system implementations and integration, account supervision and financial management. He also directs the development of industry straight-through processing offerings that integrate with enabling technology products. Key areas of focus for Mr. Cloutier’s practice include, underwriting, claims, customer experience and transforming back-office processing using enabling technologies such as content management and business process management. Mr. Cloutier joined Paragon in 2003 where he spearheaded the delivery of a suite of straight-through-processing solutions for the Insurance practice. Prior to joining Paragon, Mr. Cloutier held a senior management position at Prudential for 16 years. Mr. Cloutier received a Bachelor’s degree from Monmouth University, NJ. He actively participates and holds executive positions in various community and local organizations.

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