What Is a Cost-Sharing Reduction, Anyway?
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For Jean Sylwanowicz, 57, the months-long drama that was the effort to repeal and replace the Affordable Care Act isn’t really over.
That’s because she, like millions of people who get their health insurance through the ACA, depends on subsidies to afford coverage. And the Trump administration has yet to decide whether it will continue to kick in the $7 billion per year that insurers need to provide that financial break to consumers.
Insurance companies provide these subsidies, known as cost-sharing reductions (CSRs), to reduce out-of-pocket costs for deductibles and co-pays for low-income people.
Sylwanowicz, a divorced part-time music teacher from Mount Shasta, Calif., who suffers from Crohn’s disease, says she wouldn’t be able to afford insurance without them. When she had surgery to remove an ovarian cyst last year, her deductible—what she has to pay before insurance kicked in—was just a few hundred dollars.
Insurers have been warning for months that if funding for the CSRs are cut off, they’ll be forced to hike premiums to cover these costs—or pull out of marketplace exchanges altogether.
The ABCs of CSRs
Almost 6 million Americans—57 percent of the people who buy insurance through the ACA—get CSR subsidies. But many people don’t really understand how they work or whether they even qualify for one, Pollitz says. Here’s what you need to know about these subsidies:
Who Qualifies for a CSR?
The subsidies are for people with incomes between 100 and 250 percent of the federal poverty level.
For 2017, that’s $12,060 to $30,150 per year for an individual and $24,600 to $61,500 for a family of four. The actual amount depends on where you fall in that range. The lowest earners could pay as little as a few hundred dollars for an annual deductible and nothing for co-pays or co-insurance. If you make less than the threshold to get CSRs, you may qualify for Medicaid.
Note that CSRs are in addition to tax credits, which reduce monthly premiums for people with incomes between 100 and 400 percent of the poverty level (up to $48,240 for an individual and $98,400 for a family of four).
Tax credits to pay premiums apply to any one of the four metal tier plans offered on the ACA: Bronze, Silver, Gold, and Platinum. But you can get a CSR only if you are in a Silver plan. Bronze and Silver plans tend to have lower premiums but higher deductibles than Gold and Platinum policies.
How Does a CSR Help With Insurance Costs?
They can not only significantly help reduce your co-pays and deductibles but also limit the total amount you pay out of your own pocket for in-network medical services in one year.
With no CSR, your out-of-pocket maximum for 2017 is $7,150 for any ACA individual plan and $14,300 for a family plan. But if you get a CSR subsidy, your out-of-pocket maximum would range from $2,250 to $6,600 for an individual or from $4,500 to $13,200 for a family, depending on your income.
How Do They Work?
The process is almost invisible to those who receive the subsidies. If your income makes you eligible, when you apply for health insurance through one of the federally or state-run ACA exchanges you’ll automatically be shown only Silver options that are subsidized and have smaller deductibles, co-pays, and co-insurance. You can compare and sign up for other metal tier plans, which may have lower premiums but make you ineligible for the cost-sharing reductions.
How Could You Be Affected If the CSRs Aren’t Funded?
If you qualify for a CSR, you’ll still get the subsidies because insurers are required to provide them whether they get reimbursed by the government or not. Insurers would compensate for that reduced revenue by raising premiums for 2018. So the people who would suffer the most are those with higher incomes, who don’t qualify for premium tax credits or CSRs. They would feel the pain of big rate hikes most.
If you plan to buy ACA insurance for 2018 and want to prepare yourself amid all the uncertainty, read "What You Should Do Now That GOP Plans to Repeal the ACA Have Failed."
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