In watlz, how does a lead indicate whether he wants the follow to do a heel turn or a reverse turn? They seem to start off the same.

Let's see lady's steps to know what's the difference from her point of view (always do this, because you want to 'manipulate' her by your leading!): At a heel turn Lady has to CLOSE FEET on 2, so after 1 she doesn't swing to the side but pulls her LF towards RF.
Because of this you have take care not to transfer your side swing between 1 and 2 to the lady, by taking weight a little longer over your LF e/o 1, so that she feels that she has to turn on one spot (the point where her RF arrived e/o 1). This may be felt as "releasing hold a little bit" BUT this effect of course must not be seen from outside the couple, because otherwise the dancing hold looks wobbly!

Actually it's far simpler than this.

The lady bends her arriving leg on step one of a waltz reverse, wheras in a heel turn she straightens it. The man must simply do the same thing: dance onto a straight leg being sure to create foot rise before the end of the step for step 1 of a heel turn, dance onto a softer leg with foot rise as the knee softens for step 1 of a waltz reverse.

By straightening her arriving leg as she arrives on it, her free leg will swing only to closed and not through. The lady does not "pull" her leg closed, because she doesn't "know" it's a heel turn - the man has to create a movement that will swing her leg closed without thought, and that movement is getting her to stand up in place by doing so himself.