How H&R Block plans to capitalize on Obamacare

February 15, 2013

Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoons for the latest edition.

Of all the companies worried that the Affordable Care Act will be bad for business, H&R Block may lay claim to the most unique gripe.

The firm prepares millions of tax returns, one of every seven that gets filed to the Internal Revenue Service. The vast majority of its consumers receive a refund; all told, their 26.5 million customers received $50 billion in refunds in 2012.

The Affordable Care Act could change that: It charges a tax penalty to Americans who do not carry health insurance coverage. And that has H&R Block worried that some of those refunds will get eaten up - with a lot of angry customers pointing a finger at them.

"Eighty-five percent of our customers get a refund," Kathy Pickering, who directs the H&R Block Tax Institute, says. "That refund could be offset by the penalty. And if that happens, they're going to be understandably angry."

Last year, the company started thinking about how to curtail those types of surprises; they did consumer research to understand how much people knew about the law, what they liked and what they didn't.

Now, during this tax season, H&R Block is rolling out a Health Care Review product, a no-charge assessment of the subsidies and penalties they will likely face in 2014.

The health law's subsidies for insurance coverage and penalties for not carrying a plan don't start in 2014. But the income that will determine how big of a subsidy an individual or family will receive — that's the income that's being filed right now, in 2013.

H&R Block does not disclose the average income of its customers, but does say that many are low to middle income. Most that earn less than 400 percent of the poverty line - just about $45,000 for an individual - would be eligible for a tax subsidy.

Do consumers have any idea? H&R Block's own research suggests they do not: The company found, in a survey conducted last year, that 77 percent of Americans had no idea that the income tax return they're filing right now will determine how generous, or skimpy, of a subsidy they receive in 2014.

Forty-four percent of those between 18 and 34 were unaware that they would face a penalty for not purchasing coverage.

"We found that most people didn't understand what the Affordable Care Act would mean for them," Pickering told me. "That's when we decided this year to move forward with this education effort."

Starting with this tax season, H&R Block started running advertisements in print and television, trying to build awareness of the new services they offer. One features a tax adviser, Ana Maria Costenza, who notes that the Affordable Care Act means "big changes" and that she has read all 900 pages of the law (Pickering confirms she did indeed read the entire law - "it took weeks" - although not all of the other 89,999 H&R Block tax preparers may have done a similar deep-dive.)

"Your 2012 tax return helps establish your eligibility for assistance in paying for health insurance," one fact sheet reads. "Don't delay, it's important to file your return on time with professionals who understand the new rules."

Not much will change for H&R Block consumers who already have health insurance coverage. But for those who don't, the company will offer an "H&R Block Tax and Health Care Review."

Pickering showed me one that had been drawn up for a fictional family of four, who had an income of $40,000 in 2012. That family would be eligible for a subsidy and, if they bought health insurance on the exchange, H&R Block estimates it would cost $170 per month.

If they decided to forgo coverage, they will face a penalty of $285 in 2014, which would jump to $975 in 2015. The CBO estimates that about 6 million Americans will pay this fine.

The reaction to those numbers, Pickering says, is similar to public opinion on the Affordable Care Act: Very split.

"Some are excited to hear that the health-care law is finally happening and that this is really the start for them," she says. "Others see this as one more penalty that they'll have to face, just something else from the federal government. It's pretty representative."

H&R Block rolled the Health Care Review out to consumers this tax season. It's now exploring the possibility of partnering with other health industry groups. That could include hiring health insurance brokers, who have the authority to advise customers on what plans to purchase, or working with a specific health insurance plan or state health insurance exchange.

"They see us as a trusted adviser," Pickering says of H.R. Block customers. "We are in the middle of a deep analysis of how we can best serve our customers, and we're definitely looking at all options."

KLIFF NOTES: Today's top health policy reads from around the Web.

President Obama's proposed Medicare cuts face an uphill climb.

In just a handful of words in his State of the Union address, President Obama renewed a proposal to lower the amount that the federal government pays for drugs taken by low-income seniors — a measure that supporters say would save the government more than $150 billion over the next decade. But it faces formidable opposition from Republicans, some Democrats and the powerful pharmaceutical industry, making passage unlikely." Katie Thomas and Robert Pear in The New York Times.

Missouri legislators aren't planning to fund the Medicaid expansion that their governor, Democrat Jay Nixon, supports. "House Budget Chairman Rick Stream, a Kirkwood Republican, said he had to file a version of the budget today, and he made the decision not to include funding to expand the public health insurance program for the poor." The Kansas City Star

An academic look at Oregon's big new Medicaid reforms. "Oregon has embarked on an ambitious program centered on the ACO model, which aims to change Medicaid financing and health care delivery. The Oregon experiment highlights both the bold vision of ACO-based health care reform and the potential challenges to executing that vision. Failure of the Oregon experiment would not only jeopardize health care for vulnerable Oregonians but also call into question the viability of central tenets of the ACA." Eric Stecker in the New England Journal of Medicine.

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