Back in November, I suggested that tax prep firms might be a useful portal for low-income people to get insurance coverage through the Affordable Care Act. The idea: Since many key ACA-related issues are income-based, commercial tax prep is an easy way for folks to learn whether they are eligible for expanded Medicaid coverage, how much of a premium subsidy they can get, and how much of a penalty they’d owe for not getting coverage.
Now, a new report by my Urban Institute colleagues Stan Dorn, Matthew Buettgens, and Jay Dev shows just how many of the uninsured could benefit from linking tax prep to the ACA. They figure that at least 18.9 million federal tax filers have no insurance and are eligible for either Medicaid or ACA premium subsidies. That’s almost three out of every four of the uninsured who could benefit from the ACA.
At the same time, nearly 60 percent of those making $50,000 or less reported getting some third-party help with their tax returns in 2008. Nearly 65 percent of filers claiming the Earned Income Tax Credit use paid preparers (if you saw the EITC instructions, you’d know why).
The Urban study actually underestimates the number of filers since it counts only those legally required to fill out 1040s or those eligible for the EITC. However, many other workers also file—mostly to get refunds because they have had too much tax withheld from their paychecks.
There are other benefits to tying ACA insurance to tax prep. The vast majority of low-income people receive refunds and many get refundable credits. That cash in their pocket may make them more likely to buy coverage.
And, of course, tax preparers are professional form-fillers. They already collect most of the information consumers need to apply for coverage, making it even easier for their customers. Their role will be even more important starting in 2015 when federal funding for application assistance comes to an end.
Some tax prep firms have already figured out the potential of this market. The store-front firm Jackson Hewitt is probably the most enthusiastic about the model. Its staffers will complete and even mail the Medicaid paperwork for clients who are eligible for expanded coverage. They are not licensed brokers so can’t sell insurance directly, but the firm has created a partnership with the commercial online insurance marketplace Getinsured which will help Jackson Hewitt customers buy coverage.
For no extra fee, Jackson Hewitt will figure your subsidy (and your penalty) when it prepares your taxes. And, if you want, it will send that information directly to Getinsured, where you can buy a policy.
Jackson Hewitt isn’t alone: H&R Block is partnering with the commercial online health exchange GoHealth to help people enroll through Block-branded online chat and phone support. In a pilot program, Block also will have insurance agents located in some Arizona tax offices. Intuit has created a product called TurboTax Health and has a partnership with the commercial online marketplace eHealth Inc.
The data Stan and his colleagues have published suggest it might make sense to revise the 2015 ACA open enrollment season so it overlaps with the April 15 tax filing deadline. Currently, ACA enrollment is scheduled to run from Nov. 15, 2014 to Jan. 15, 2015. A brief extension could even help this year since 20 percent of EITC returns are filed after March 31, the end of the 2014 open season. Among all returns, about 40 percent are filed after March 31.
As any good behaviorist will tell you, salience matters. And when you see how much of a subsidy you can get if you buy insurance, and how much of a penalty you’ll owe if you don’t, it tends to focus the mind. And, in this case, it has the potential to grab the attention of millions of people.