ObamaCare’s Cost Sharing Reduction Subsidies (CSR) lower out-of-pocket costs, based on income, for Silver plans bought on the Health Insurance Marketplace. Along with Premium Tax Credits, ObamaCare’s Cost Sharing Reduction subsidies lower what you pay for out-of-pocket costs like deductibles, copays, and coinsurance, making health insurance coverage more affordable and effective for those enrolled.
Bottomline: Cost sharing Reduction Subsidies (CSR) lower out-of-pocket cost sharing amounts on Health Insurance Marketplace Silver plans for those making between 100% – 250% of the Federal Poverty Level in household income. These pair with Premium Tax Credits which lower premium costs for those making between 100% – 400% of the poverty level.
ADVICE: One of the best deals anyone can get under the Affordable Care Act on health insurance is a high end marketplace Silver plan with cost sharing reduction subsidies applied. This can not only give you a solid network at a low premium (due to tax credits), it can also give you cost sharing amounts in-line with a Gold or Silver plan. Try pairing a high deductible Silver plan with an HSA to lower your Household Modified Adjusted Gross Income for maximum savings!
Cost Sharing Reduction Subsidies lower the amount you have to pay out-of-pocket for deductibles, coinsurance, and copayments. They can also reduce the maximum out-of-pocket costs you are responsible for in a policy period. More specifically, they do this by raising the actuarial value of your health plan.
Typically CSR subsidies only apply to covered benefits, meaning it won’t reduce costs on services your plan doesn’t cover.
CSR subsidies only apply to “covered costs” (in-network services covered on your plan). Covered costs usually include only items from ten categories of essential Health Benefits. When you compare plans you’ll see what services are covered in-network and will see the plans out-of-pocket costs reflecting your Cost Reduction Subsidies.
Typically your insurer will only offer to cover part of your costs or count your costs toward your deductible if you use covered in-network services. If you shop out-of-network expect higher costs.
To qualify for Cost Sharing Reduction Subsidies you must:
The amount of out-of-pocket assistance you are eligible for is based on income and is offered to those making between 100% to 250% of the Federal Poverty Level (FPL). CSR subsidies do not lower your premium like Advanced Premium Tax Credits, as they apply only to cost sharing amounts.
CSR subsidies reduce your out-of-pocket expenses by raising the actuarial value of your plan (the average out-of-pocket costs an insurer pays on a plan). Specifically, they lower coinsurance, and lower copays, deductibles, and maximum out-of-pocket costs you will pay in a policy period through subsidization. This means that some folks will not only qualify for lower premiums on a Silver plan via tax credits, but may also get the out-of-pocket costs similar to a Gold or Platinum plan.
There are three levels of CSR subsidies: CSR 73, CSR 87, and CSR 94. The numbers refer to the actuarial value (AV). Benefits sheets will include different summaries for different CSR levels.
Income Level Actuarial Value (the amount of costs a Silver plan will cover due to cost sharing reduction subsidies for % of the Poverty Level).
100-150% FPL = 94% Actuarial Value (CSR 94)
150-200% FPL = 87% Actuarial Value (CSR 87)
200-250% FPL = 73% Actuarial Value (CSR 73)
More than 250% FPL = 70% Actuarial Value
An Example of Out-of-pocket maximum limits (equal to deductible limits):
The below example uses 2015 numbers, for 2017 limits for over 250% are $7,150 for an individual and $14,300 for a family and the same methodology (as described above) applies. CSR assistance is automatically calculated on plans when you buy them. Keep in mind not every plan uses the same deductible or out-of-pocket limit, but all have maximum limits that change each year.
NOTE: If you’re a member of a federally recognized tribe or an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder, you may qualify for additional cost-sharing reductions.
TIP: See 2020 cost sharing reduction amounts for more recent data.
Here is an example from Health Care Reform Beyond the Basics that shows of how the different CSR levels affect a Silver plan obtained on the Health Insurance Marketplace (exact figures are subject to change each year; the chart below is an example).
Table 1 | ||||
How Does the Cost-Sharing Reduction Level Affect Cost-Sharing Charges? | ||||
Standard Silver – No CSR | CSR Plan for 201-250% FPL ($22,981-$28,725) | CSR Plan for 151-200% FPL ($17,236-$22,980) | CSR Plan for up to 150% FPL (up to $17,235) | |
Actuarial Value | 70% AV | 73% AV | 87% AV | 94% AV |
Deductible (Individual) | $2,000 | $1,750 | $250 | $0 |
Maximum OOP Limit (Individual) | $5,500 | $4,000 | $2,000 | $1,000 |
Inpatient hospital (After deductible) | $1,500/ admission | $1,500/ admission | $250/ admission | $100/ admission |
Physician visit (After deductible) | $30 | $30 | $15 | $10 |
Unlike Premium Tax credits you won’t owe back any cost assistance you got on out-of-pocket costs via Cost Sharing Reduction subsidies. In some instances if your income ends up being lower than you project and you adjust your marketplace account, you can get credit (refund) for cost-sharing charges already paid in a calendar year! If you haven’t paid a claim yet, that charge is not affected by changing Cost Sharing levels. This fact essentially makes Cost Sharing Reduction subsidies one of the biggest, yet least talked about, perks of the Affordable Care Act.
Remember cost sharing reduction subsidies only affect your share of covered costs, so they only take effect when you use covered health care services.
Thomas DeMichele is the head writer and founder of ObamaCareFacts.com, FactsOnMedicare.com, and other websites. He has been in the health insurance and healthcare information field since 2012. ObamaCareFacts.com is a.
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