Everything You Need to Know About Health Care Cost-Sharing Reductions

Everything You Need to Know About Health Care Cost-Sharing Reductions

May 03 2017

With the ongoing debate over health care reform happening in the news and on Capitol Hill, you’ve probably heard the term “cost-sharing reductions.”

You may be asking yourself – what are cost-sharing reductions and how do they affect my health insurance benefits?

Here are answers to some commonly asked questions about cost-sharing reductions.

What are cost-sharing reductions?

Some people receive premium tax credits to help pay their premiums for policies secured through the Affordable Care Act’s (ACA) marketplaces. If you are eligible for a premium subsidy you may also be eligible for cost-sharing reductions to help reduce your deductible, copayment and other out-of-pocket charges. If your or your family’s income is between 100 and 250 percent of the poverty level, you can receive cost-sharing reductions if you are eligible for a premium tax credit and purchase a silver plan through the federal or state marketplaces.

How do they work?

Under the ACA, the federal government provides extra funding to insurance companies that offer plans with discounted deductibles and copayments, making health care more affordable for low-income individuals and families. While CSRs provide real value and savings, the health plan simply acts as an administrator of CSR payments. The insurer receives funding from the government to pay providers for covered treatments and services for eligible individuals.

What is the impact of CSRs?

In 2016, about 60 percent of all ACA enrollees – 6.4 million people – benefited from a reduction in their overall out-of-pocket costs because of CSRs. These benefits go directly to consumers to help reduce the average deductible for enrollees in the lowest income bracket by about $3,354, according to the Kaiser Family Foundation.

Why are CSRs such a hot topic right now?

The federal health care law does not explicitly link the subsidies associated with CSRs to a permanent funding source. As a result, the authority for government funding of the CSR payments is currently the subject of a lawsuit between the U.S. House of Representatives and the U.S. Department of Health and Human Services (HHS). This dispute is creating significant market uncertainty about the availability of CSR funding for consumers and insurance providers, alike.

While the White House recently agreed to continue CSR payments temporarily, a final decision has not been made and the administration could move to end the payments at any time in the future.

If CSR funding remains in limbo or is eliminated altogether, insurers will have to make difficult decisions about market participation in 2018 and beyond. In addition, premium costs may also be impacted. Recent studies estimate that discontinuing CSR payments could increase average premiums for a benchmark silver plan by about 19 percent.

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