It's one week to the final deadline to enroll in a health plan, but it's also tax season. Millions of people are visiting their tax preparers -- often so they can get the biggest refund possible. But this year, many of them are also getting advice about health insurance. That's because next year, under the Affordable Care Act, people will have to pay what could be a hefty tax penalty if they are uninsured for more than three months.
Susana Veamatahau Pau is a tax preparer with Jackson Hewitt Tax Services, which has 6,400 locations nationwide. Like other tax advisers, she sees it as her responsibility to make sure her clients know what's coming.
"The government is not the first person they’re going to interact with when they get the penalty," she says from her office in San Mateo. "It’s really us."
Pau sees a lot of plumbers and pest control technicians who say they plan to just pay the penalty instead of buying insurance. But she says that's because there's a misunderstanding about how much the penalty is. The fine is either $95 or roughly 1 percent of household income -- whichever figure is greater. For people who make $60,000 a year, the fine could be more than $500. Pau's customers freeze with sticker shock when they hear that.
"They are not pleased," she says. "Some are just barely getting refunds. One got a refund that’s like $300. Their penalty is going to pretty much eat that up."
Penalty Doubles Next Year
Next year will be even more harsh. People will find out the penalty is doubling to 2 percent of income.
Brian Haile is the vice president for health policy at Jackson Hewitt. He says the higher penalty isn't even the worst of it. For people who find out during their tax appointment this year that they will have to pay a fine, there's a way out. They have until March 31 to enroll in a health plan. But next year, they could be stuck. The deadline to enroll in health insurance is February 15th.
"Say that they come in on February 17th," Haile says. "We tell them that you have to pay 1 percent of income over the filing threshold for last year -- and you're going to have to pay double that this year for being uninsured."
And, for that person who comes in after the deadline to sign up for a plan, there's no way out. They will be too late to enroll.
"That's not going to sit well," Haile says. "So there's going to be a lot of public anger about this because the open enrollment periods won't perfectly align with the tax season."
That's why his tax advisors are trying to persuade people to sign up for health insurance now.
That nudge was helpful to Michael Patterson. His wife has been uninsured for four years. Plans were just too expensive. At their tax appointment they found out she qualified for financial assistance.
"We were very excited that we might be able to get insurance for her," Patterson says.
For freelance musician Rob Shelton help came in the reverse order. He got tax advice not from a tax preparer -- but from his health insurance broker. His income puts him right on the border of qualifying for Medi-Cal, the state’s free health insurance coverage for people who are low income. Or, he could get a federal subsidy to help him buy a private health insurance plan on the Covered California marketplace. His broker suggested some strategic tax moves.
First he wondered if he should skip some deductions, effectively giving him a high enough income to move from Medi-Cal to a subsidized plan through Covered California. "Or should I take all my deductions and get into Medi-Cal, which is what I ended up doing," he says.
H & R Block is also wading into health insurance this year. They set up a new website and a dedicated toll-free number with information on health plans. But the marketing campaign is a bit of a misfire.
Tax advisor Guillermo Amoretty pulled up the website at his San Francisco office, showing in a soft green font, 'helpth is here.' 'Helpth' is a combination of the words help and health, Amoretty says. "And it’s not a typo."
Amoretty may be providing tax advice to others, but It’s unclear if he will take it for himself. He’s 29 and uninsured -- and still deciding whether to get coverage or pay the penalty.
"It will depend on how much my income will be by the end of the year," he says.
He has one more week to figure it out.