URGENT MESSAGE: Five years after the passage of the Patient Protection and Affordable Care Act (PPACA)—also known as the “Affordable Care Act,” or “Obamacare”—many independent urgent care practices are still uncertain of their obligations. In addition to legal mandates, a competitive job market can make a compelling case for offering or subsidizing employee health benefits.
Alan A. Ayers, MBA, MAcc is Practice Manager Editor of The Journal of Urgent Care Medicine, a member of the Board of Directors of the Urgent Care Association, and Vice President of Strategic Initiatives for Practice Velocity.
Urgent care is a “people” business. Physicians, nurses, medical assistants, and technicians are absolutely essential to serving a rising number of patients, yet the number of available employees is not keeping pace with patient demand. For example, demand for medical assistants in the U.S. workforce is expected to grow by 162,900 positions (29%) between 2012 and 2022.1 An urgent care center that offers lower pay, fewer benefits, less recognition, a less compelling culture, or more cumbersome systems and processes than other healthcare employers will experience a constant churn of employees. Tight labor markets thus result in higher salaries and better benefits packages offered by employers, often well above the minimums mandated by law.
According to the 2014 Urgent Care Benchmarking Survey provided by the Urgent Care Association (UCA), the percentage of respondents offering health insurance to physician and nonphysician employees is 82% and 90%, respectively. And the percentage offering health insurance to the dependents of physicians and nonphysician employees is 70% and 73%, respectively.
Based on calculations of average opening hours, average patient volume, and average staffing levels, the “average” urgent care center has fewer than eight full-time equivalent (FTE) employees. So, by and large, urgent care is made up of what’s considered small- to medium-sized businesses.
The Federal Requirement to Carry Health Insurance
“Obamacare,” or the Patient Protection and Affordable Care Act (PPACA) of 2010, requires any company that employs 50 or more individuals to offer health insurance to its FTE employees, defined as one who works an average of more than 30 hours per week. Table 1 can be used to determine whether or not an employer is required to offer health insurance coverage based on its number of FTEs. If the total in step 4 is greater than 50, then the employer most likely is required by the PPACA to offer health insurance.
Table 1: Calculation of Full-Time Equivalent (FTE) Employees
|1) Enter the total number of hours worked in a month by all part-time employees. (These are employees who average less than 30 hours per week.)|
|2) Divide the number in step 1 by 120.|
|3) Enter the number of full-time employees. (These are employees who average more than 30 hours per week.)|
|4) Add the results of steps 2 and 3. This is the total of an employer’s FTE employees.|
Employers with fewer than 50 FTE employees are not required to provide healthcare coverage, though there can be some definitive advantages to doing so even for these businesses. Some of these benefits may include:
- Tax deductions and/or credits―By offering healthcare coverage, an urgent care center provides its employees a benefit that increases their overall compensation, allowing the company an income tax deduction for the contribution. Companies with fewer than 25 employees may also be eligible for a tax credit if the business purchases health insurance for its employees.
- Attraction and retention of quality employees―Companies may also be able to both attract and retain the most qualified workers by providing additional “amenities” such as health insurance to employees.
- Group purchasing power―Even if the employer opts not to contribute toward the cost of the employees’ health insurance, the opportunity to obtain group rates for coverage can be a valuable benefit for employees.
- Reduction of absenteeism―By having health insurance coverage that offers preventive care services, employers can also help to ensure that their employees are kept healthier and, in turn, on the job.
Considering Medicaid Recipients
Most urgent care physicians employ at least one medical assistant, typically someone with a high school diploma or equivalent who has completed a certificate program and/or on-the-job training. Compensation for medical assistants tends to be relatively low ($10–$12 per hour, averaging approximately $29,000 per year nationwide, according to the Bureau of Labor Statistics and the UCA Benchmarking Survey).
Demographically, many medical assistants are unmarried mothers who are likely to have dependent children living in their homes. Based on the mother’s income, these children are often qualified for S-CHIP (the State Children’s Health Insurance Program), and the mother may also be on Medicaid herself. In this common scenario, some employers of Medicaid populations educate and assist employees with applying for Medicaid benefits.
Even if the employee and/or her children are eligible for Medicaid, under the PPACA every employer who meets the FTE mandate must still offer health insurance coverage to the employee. However, the employee may not be eligible for premium tax credits in this situation.
Coverage for Spouses and Children
While PPACA mandates that employers offer health insurance to employees and their dependents, it identifies only children, not spouses, as eligible dependents.
In some cases, employees at urgent care facilities may be eligible for health insurance under a spouse’s plan. Even if they waive coverage through the spouse’s employer, coverage must still be offered if they are full-time employees or the employer will be penalized. This coverage must also be considered affordable, and provide what is considered at least minimum value.
With that in mind, there may be scenarios where both the urgent care facility employee and the spouse will carry health insurance coverage through each of their respective employers. In these particular cases, if the couple has children, how do they decide which plan covers the kids?
Here, the dependent children may be covered under both of the parents’ plans. However, in determining which of the plans will be the primary benefit payer, the health plan of the parent whose birthday falls first during the calendar year will be used.2
Providing Coverage vs Reimbursement
Urgent care providers may not be aware that, as of July 2015, they are no longer allowed under the PPACA to reimburse employees for the cost of health insurance coverage purchased out in the individual market. The IRS may even impose a penalty of $100 per day ($36,500 per year), per employee against businesses that continue this practice.
In fact, according to the U.S. Department of Labor, if an employer offers its employees either pretax or post-tax funds and requires the employee to use such funds to buy health insurance in the individual market or through the exchange, then essentially, the employer has established a welfare benefit plan that would be covered by the Employee Retirement Income Act of 1974 (ERISA).
Potential Penalties for Not Complying with the PPACA Coverage Mandate
Those employers that are obligated to provide health insurance to their employees must offer coverage that is considered to be both affordable and that provides at least minimum value—or they may face a monetary penalty for not doing so. Table 2 defines “minimum value” and “affordability.”
Table 2: Affordability and Minimum Value
|Minimum value: A plan provides “minimum value” if it pays at least 60% of the cost of covered services (considering deductibles, copays, and coinsurance). The Department of Health and Human Services has developed a minimum value calculator that can be used to determine if a plan provides minimum value (https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/mv-calculator-final-4-11-2013.xlsm; accessed October 22, 2015).
Source: Employer Mandate Fact Sheet, http://www.cigna.com/assets/docs/about-cigna/informed-on-reform/employer-mandate-fact-sheet.pdf. Accessed October 22, 2015.
If at least one of the full-time employees receives a premium tax credit or a cost-sharing subsidy in either the federal or state marketplace, then the penalty for each month that the employer does not offer coverage is calculated as follows (as of 2016):
($2,160 / 12) x (number of FTE employees – up to 30 employees)3
In addition, if the employer has at least 50 FTE employees and does offer health insurance, but that coverage does not pay for at least 60% of the covered healthcare expenses for a standard population (minimum value), then the employer can still face a penalty for not offering coverage that is considered to be affordable and that provides a minimum value. This penalty for each month is calculated as follows (as of 2016):
- ($3,240 / 12) x number of FTEs receiving a premium tax credit that month
- Up to a maximum of ($2,160 / 12) x (number of FTEs – up to 30 employees)4
The employer could also face this same penalty if any employees had to pay more than 9.5% of the amount of their household income for the employer-provided healthcare coverage.
Taking the Next Step
Urgent care facilities would be well advised to consider several factors in deciding whether or not to offer health insurance coverage to employees. Some of those key determinants include:
- The number of FTE employees
- Employee wages
- Whether any employees are covered by alternate insurance programs (such as Medicaid or a spouse’s insurance coverage)
- Anticipated number of employees that will enroll
- Employee demographics (ie, age, gender, household)
- Employer’s tax rate
- Cost to offer coverage vs cost of the penalty for not offering coverage
Table 3 can help employers calculate the cost to offer coverage vs the cost of the penalty for not offering coverage.
Table 3: Calculating the Cost of Coverage vs Cost of Penalties
|Step 1||Enter the hourly rate for lowest paid full-time employee||$|
|Step 2||Enter hours worked annually by lowest paid full-time employee|
|Step 3||Multiply total of step 1 by total of step 2. This is the annual wage for lowest-paid full-time employee||$|
|Step 4||Enter total amount of health insurance premium for a single individual, which has a 60% actuarial value||$|
|Step 5||Multiply the total of step 3 by 9.5% (0.095). This is the maximum amount that the lowest paid full-time employee can contribute annually to health insurance premium, or the plan may be deemed unaffordable and employer may be subject to penalty tax||$|
|Step 6||Subtract total of step 5 from total of step 4. This is the employer’s share of annual health insurance premium||$|
|Step 7||Enter the employer’s corporate tax rate|
|Step 8||Multiply total of step 6 by total of step 7. This is the tax deduction for the employer’s share of the health insurance premium||$|
|Step 9||Subtract total of step 8 from total of step 6. This is the net annual employer cost for health insurance premiums for full-time employee||$|
|Step 10||Enter the number of full-time employees|
|Step 11||Enter the percentage of full-time employees that enroll in the employer sponsored plan|
|Step 12||Enter the number of full-time employees that enroll in the employer-sponsored plan|
(The annual cost to the employer will be the total in either step 13 or 14.)
|Step 13||Multiply the total in step 12 by the total in step 9. This is the total annual cost to the employer of providing a company-sponsored health insurance plan||$|
|Step 14||Subtract 30 from the total in step 10, then multiply the result by $2,160. This is the amount of the penalty for not providing health insurance that meets the minimum essential coverage defined by the PPACA and at least one employee receives a subsidy through the exchange||$|
Source: A Guide for Complying with Health Care Reform for Employers, The Kennion Group, 2015.
If the employer decides to move forward with offering healthcare coverage, there are additional options to consider regarding the actual coverage that will be provided, such as:
- Type of plan to provide. The employer will need to determine whether it will offer fee-for-service benefits, or instead to provide benefits that are in an HMO or PPO format. Depending on the situation, the employer may choose to offer more than just one type.
- How to handle premiums. The urgent care employer will also need to decide how the premiums for the plan will be paid. In this case, it must determine whether the employee will be responsible for 100% of the premium, or if the employer will contribute a percentage of the cost.
- How much coverage to offer. The amount of coverage to offer is also a point to consider. Here, the employer will need to determine whether it will offer only the minimum amount of coverage that is required by the PPACA, or if it will offer a higher amount of coverage to its employees.
Regardless of what an employer ultimately decides to do, it’s essential to be well informed of all potential options—especially for companies that will be making any type of changes to their benefit offerings, their full-time employee ratio, or both.
- Bureau of Labor Statistics. Occupational Outlook Handbook. http://www.bls.gov/ooh/Healthcare/Medical-assistants.htm. Accessed October 22, 2015.
- Insure.com. “Birthday rule” determines health insurance coverage. Available at: http://www.insure.com/health-insurance/birthday-rule.html. Accessed October 22, 2015.
- 3. The Henry J. Kaiser Family Foundation. Employer responsibility under the Affordable Care Act. Available at: http://kff.org/infographic/employer-responsibility-under-the-affordable-care-act/. Accessed October 22, 2015.