Tax help comes with health insurance advice

Derrick Bean filed his income taxes at an H&R Block office in Los Angeles this month, and the 26-year-old left with something unexpected: a price quote on federally subsidized health insurance.

Using the information from his 2012 return, a tax advisor told the actor and waiter that he would qualify for significant government help and pay only about $65 a month in premiums under the federal healthcare law. If he skips coverage, H&R Block warned him, he faces a $95 tax penalty next year and $356 the following year.

"I was surprised to hear all that," Bean said. "It's good to finally see some concrete evidence that this is happening."

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As tax season kicks into high gear across the country, millions of Americans are getting their first taste of the biggest change to health insurance in nearly half a century. Many of the changes in President Obama's Affordable Care Act take effect in January, when most Americans will be required to buy coverage or incur a penalty.

The individual effects and consequences of the nation's healthcare overhaul in 2014 are far from certain, but insurance companies, tax consultants and other financial planners are starting to offer cost estimates for next year and describe the penalties for inaction.

For many consumers, their 2012 tax returns will offer some of the first clues on what financial aid may be available and what coverage may cost.

"Your 2012 tax return is key to determining if you're eligible for any financial assistance on health insurance," said Meg Sutton, senior advisor for tax and healthcare services at H&R Block. "This law represents sweeping changes for how the middle class will get insurance."

The Internal Revenue Service and state insurance exchanges will rely primarily on 2012 federal tax returns, officials say, to verify people's income and household size and to help determine what premium subsidies are available. By October, exchanges in California and other states are slated to open for enrollment and allow comparison shopping of health plans.

In California, individuals earning up to about $15,000 will qualify for an expansion of Medi-Cal, the state's Medicaid program for the poor and disabled.

Beyond that, people and households earning up to 400% of the federal poverty level are eligible for subsidies. For instance, a family of four earning about $93,000 in modified adjusted gross income may be eligible for a monthly credit of $445 and pay $742 a month for health coverage. In 2014, the penalty for not having coverage is $95 per adult or 1% of household income, whichever is greater. The penalties grow in subsequent years.

An estimated 2.6 million Californians would qualify for premium subsidies, and nearly 800,000 of them are in the Los Angeles area, according to state data.

At an H&R Block Inc. office on Wilshire Boulevard in Los Angeles, Cindy Salcedo Bravo, 35, flipped through a stack of drugstore receipts on a recent Friday morning as her 8-month-old son, Fernando, bounced on her knee.

She rattled off dollar amounts to her tax advisor, who tallied them for a potential deduction on medical expenses. Then they sorted through W-2 forms, investment statements and other paperwork.

As they wrapped up, tax advisor Blanca Chavez began the company's free health insurance review by asking the Northridge mother whether her family of six had health coverage.

Bravo responded that they have insurance through her husband's engineering job. Chavez reminded Bravo that her family could face a steep penalty if they lost employer-based insurance and didn't find new coverage.

"On my tax return? Regardless of my age?" asked Bravo, her reddish-black hair pulled back in a ponytail. "I didn't have any idea about that. I need to talk to my parents, because they don't have health insurance."

Nationwide, H&R Block officials are urging customers such as Bravo who have existing health coverage to examine the estimated cost of subsidized insurance through the new exchange since they may be paying more for their employer plan.

"A lot of people think, 'I have insurance with my job and I don't need to worry,'" said Frank Gomez, an H&R Block manager in Beverly Hills. "We're telling them to make sure you're aware of your options."

For customers who want more healthcare details, H&R Block refers them to insurers affiliated with the Blue Cross and Blue Shield Assn., an industry group that represents both Anthem Blue Cross and Blue Shield of California in the state. That partnership stands to give those insurers valuable leads on potential customers.

Although the Blue Cross and Blue Shield logo is present, there is no mention inside H&R Block's offices of Covered California. That is the state's new insurance marketplace, and it is planning to spend about $250 million on marketing statewide to establish its brand name and make it a prime destination for consumer information.

Some healthcare experts consider it a missed opportunity for Covered California with so many customers streaming into tax offices now. About 15 million Americans visited an H&R Block office last year, and it typically handles nearly 1 in 7 U.S. tax returns, according to the company.

Lucien Wulsin, executive director of the Insure the Uninsured Project, a nonprofit research group in Santa Monica, said "this is exactly when people are needing to hear about all this."

Peter Lee, executive director of Covered California, said he welcomes the information H&R Block is providing before the state's marketing ramps up this summer closer to when enrollment begins. A Covered California website is set to launch this month.

"We will be exploring relationships with tax preparers because they offer a great way to provide one-on-one assistance," Lee said. "But we don't want to be too far ahead of when people can enroll."

Bean, the actor and waiter, is among the "young invincibles" that Covered California and health insurers are eager to reach. Those young, healthy consumers can help offset the risk of too many older, sicker individuals enrolling early on and potentially driving up premiums in the exchange.

Bean said he earns less than $20,000 annually and welcomes any subsidy to make coverage more affordable. He said he has health coverage for another year on his parents' policy and saw firsthand the value of insurance when he broke his leg last summer.

"The medical bills started coming in," he said, "and they were pretty hefty."