Ana Maria Costanza likes the Affordable Care Act—a lot. “I read the whole 900 pages,” the H&R Block (HRB) tax preparer exclaims happily in a TV ad. “It literally took me weeks.” Most people have a different reaction to the thought of wading through new government regulations, and that’s the point. “I know the law,” Costanza tells the camera with a big smile, “and I can help you figure it out.”
Tax-prep companies have long looked for ways to diversify their businesses, and Obamacare may be the perfect opportunity. H&R Block is pitching what it calls a tax and health-care review so customers can be ready when the law’s income-based subsidies begin kicking in next year. Uninsured Americans will need to figure out whether they qualify for the insurance subsidies, how much they could receive, and whether it makes more financial and medical sense to get coverage or skip it and pay the penalty for violating the law. The group of taxpayers eligible for the subsidies—families of four earning between $31,000 and $94,000 a year—falls right into the sweet spot of storefront tax preparers. “This is an intersection that uniquely positions us to respond to their needs in new ways,” says Meg Sutton, senior adviser for tax and health-care services at H&R Block.
For now at least, the company isn’t charging for the reviews. The idea is to create relationships with customers so they’ll return for regular filing help and perhaps for ongoing advice as family circumstances and tax burdens change. The IRS will require taxpayers to file paperwork disclosing their medical coverage starting in 2015. Scott Schneeberger, an analyst at Oppenheimer, says H&R Block could bill $5 a head for filling out health-related forms. “They can charge for that added complexity very justifiably,” he says. Sutton declined to say what kind of fees the company is considering.
Neither Jackson Hewitt nor Liberty Tax Service, two major competitors, are pitching health-insurance advice, but Mark Steber, Jackson Hewitt’s chief tax officer, says he sees it as a logical evolution. He’s already noticed more queries about health care this year, thanks in part to his rival’s TV ad. “There’s going to be a tremendous change to the industry,” Steber says.
At a minimum, according to Schneeberger, the subsidies in Obamacare could motivate low-income earners who aren’t required to file returns to do so, potentially increasing the number of new customers by more than the typical 1 percent a year. About 60 percent of Americans pay advisers for help with their taxes, according to Oppenheimer, and H&R Block files about 18 percent of those returns. The company’s stock is up more than 30 percent this year, which Schneeberger says is a sign that the prospects for growth already have investors excited. Says Mike Tuffin, managing director of the consulting firm APCO Worldwide’s Washington office: “Most consumers hate math, and there’s a lot of math here.”