URBAN INSTITUTE 1

Tax Preparers and Reaching the Eligible Uninsured

Stan Dorn, Senior FellowThe Urban Institutesdorn@urban.org

202.261.5561

Council for Electronic Revenue Communication AdvancementMay 21, 2014

s

URBAN INSTITUTE 2

Overview

I. Potential impact of tax preparers reaching the eligible uninsured

II. TimingIII. A voluntary covenant

URBAN INSTITUTE 3

POTENTIAL IMPACT OF TAX PREPARERS ON REACHING THE ELIGIBLE UNINSURED

I.

URBAN INSTITUTE 4

Federal income tax filers, as a percentage of the uninsured who qualify for health coverage

Medica

id ch

ildles

s adu

lts

Medica

id pa

rents

Medica

id/CHIP ch

ildren

QHP subsi

dies

ALL ELIGIB

LE UNIN

SURED

53%

70% 72%88%

74%

2.3 million 3.1 million

9.7 million

18.9 million

3.8 million

Source: Dorn, Buettgens, Dev, 2014 (HIPSM-ACS). Notes: Estimates understate the prevalence of federal income tax filing as compared to administrative data.

URBAN INSTITUTE 5

Federal Income Tax Filing among the Uninsured Who Qualify for QHP Subsidies, by Age

0–18 19–34 35–44 45–64

94%90% 91%

84%2.0 million

3.1 million

Source: Dorn, Buettgens, Dev, 2014 (HIPSM-ACS). Notes: Estimates understate the prevalence of federal income tax filing as compared to administrative data.

0.4 million 4.2 million

URBAN INSTITUTE 6

Tax Preparation Method, by Adjusted Gross Income, 2008

AGI Total returns

(millions)

Tax preparation method

No identified preparer

Paid preparer

IRS-prepared

return

Volunteer income tax assistance

Tax counseling

for the elderly

Under $30,000

67.9 40.9% 55.8% 0.3% 1.5% 1.6%

$30,001-$50,000

25.4 41.7% 56.7% 0.1% 0.8% 0.8%

$50,001-$100,000

31.0 40.0% 59.1% 0.0% 0.3% 0.5%

>$100K 18.3 35.4% 64.4% 0.0% 0.1% 0.1%Total: 142.6 40.1% 57.8% 0.1% 0.9% 1.0%

Source: Dorn, Buettgens, Dev, 2014. Urban Institute Tax Policy Center analysis of IRS 2008 Statistics of Income.

URBAN INSTITUTE 7

Health program eligibility among various groups of EITC-eligible people (assuming Medicaid expansion)

Children Parents Childless adults TOTAL0%

25%

50%

75%

100%

95%

60%73% 79%

1%

12%

11% 7%

Medicaid/CHIP Marketplace subsidies

Source: Dorn, Isaacs, et al. 2013 (TRIM3, HIPSM 2012). Notes: Assumes that all states expand Medicaid eligibility for adults to 138 percent FPL.

URBAN INSTITUTE 8

Other benefits of engaging tax preparers

• Help completing paperwork• Leveraging the penalty for uninsurance at its

moment of maximum persuasive power– When it is being enforced to take away a refund

• Lowering monthly premiums– Average tax refund in the $20,000-$50,000 AGI range

exceeeds $2,700 per return– If some or all of the refund could be directed to pay annual

QHP premiums, more affordable coverage• Addressing tax reconciliation

URBAN INSTITUTE 9

TIMINGII.

s

URBAN INSTITUTE 10

Open enrollment 2015• November 15, 2014

through February 15, 2015– Previous proposed period ended

on 1/15/15• Modest overlap with tax filing

season possible• Families USA proposal

– Special enrollment through 4/15/15– If uninsured taxpayer pays penalty for

going without coverage in 2014, brief opportunity to enroll into QHP for 2015

URBAN INSTITUTE 11

Open enrollment 2016 and beyond

• HHS has now officially suspended judgment– Earlier proposal: 7 week open enrollment period,

mid-October through early December• Alternative calendar

– Open enrollment, 7 weeks ending on 3/31– Plan year starting on 5/1, ending 4/30

URBAN INSTITUTE 12

Pros and cons of alternative calendar Advantages• Can use tax preparers• QHPs seem more affordable in tax

refund season than holiday season • Carrier staff and brokers more

available when no overlap with ESI & Medicare open enrollment

• Less burden of employer verification. EINs allow verification by data match.

• Avoids perceived unfairness of forcing people to remain uninsured and pay penalty

Disadvantages• More complex tax

reconciliation• Need for transitional

QHP plan year• Some workers leave

ESI for QHPs mid-year, rather than in January

URBAN INSTITUTE 13

A VOLUNTARY COVENANTIII.

URBAN INSTITUTE 14

Issues• Challenges facing tax

preparers– Not much cooperation from

federal and state policymakers

• Concerns from a number of consumer groups about past activities of some unscrupulous for-profit tax preparers

URBAN INSTITUTE 15

Voluntary covenant concept• Policymakers offer tax preparers assistance they

need to efficiently and sustainably help numerous uninsured clients receive health coverage

• To qualify for that assistance, tax preparers can, if they wish, choose to live up to a “gold seal” code of conduct promulgated by leading health consumer groups

URBAN INSTITUTE 16

What assistance could best help tax preparers enroll numerous uninsured clients?

• Favorable publicity from, e.g., the Governor• “Back-end” data base forms that preparers could

populate with client data, eliminating the need to use websites to enroll clients into coverage

• Guaranteed acceptance of specific application forms

• Funding for successful Medicaid applications• What else?

URBAN INSTITUTE 17

Possible gold seal requirements1. Discounted tax preparation services for low-income

clients during open enrollment2. Competent tax preparation (e.g., fulfilling continuing

education requirements)3. Competent assistance with all health subsidy

programs, either directly or through a contractual partner

4. No loans for health insurance premiums (but can have full or partial refunds directed to help pay QHP premiums)

5. Either directly or through contractual partner—a. Certified navigators/assisters/brokersb. No additional charge for health applicationc. No preferential presentation of particular plans

URBAN INSTITUTE 18

Conclusion• Most eligible uninsured are not yet enrolled

in coverage• Tax preparers offer a remarkable chance to

reach the eligible uninsured• Taking advantage of that opportunity will

require close collaboration between policymakers, consumer groups, and the tax preparer community

URBAN INSTITUTE 19

Information sources• Stan Dorn, Matthew Buettgens, Jay Dev. “Tax Preparers Could Help Most

Uninsured Get Covered.” Prepared by the Urban Institute for the Robert Wood Johnson Foundation, Feb. 2014. http://www.urban.org/UploadedPDF/413029-Tax-Preparers-Could-Help-Most-Uninsured-Get-Covered.pdf

• Stan Dorn, Julia Isaacs, Sarah Minton, Erika Huber, Paul Johnson, Matthew Buettgens, and Laura Wheaton. “Overlapping Eligibility and Enrollment: Human Services and Health Programs Under the Affordable Care Act.” Prepared by the Urban Institute for the Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, Dec. 2013. http://www.urban.org/UploadedPDF/413028-Overlapping-Eligibility-and-Enrollment-Human-Services-and-Health-Programs-Under-the-Affordable-Care-Act.pdf.