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AgileHealthInsurance Report | 2017-03-06

Cost-Sharing Subsidies

Cost sharing subsidies: out-of-pocket cost reduction for low-income households

One feature of the ACA that may become a thing of the past are cost-sharing subsidies. They were created by President Obama to lower the amount low-income ACA enrollees have to pay out-of-pocket for things like deductibles, coinsurance, and copayments.. Officially called the cost-sharing reduction payment (CSR), these subsidies were available to consumers with a household income of between 100% and 250% of the federal poverty level, and were only available with Silver level plans.

The term cost-sharing refers to the ratio of payment for a policyholder’s medical expenses. A non-CSR Silver plan has a cost-share of 70%, Insurance would pay on average 70% of the medical expenses, and the policyholder would pay 30%. Under the CSR program, insurance would pay as much as 94% of the cost share and a low-income consumer could pay as little as 6% of their medical expenses..

Under the ACA, insurers are supposed to be reimbursed for these additional costs, which in the past years has added up to billions of dollars. Congress has objected to these reimbursements and so did not provide funds in the budget to cover CSR. Instead, President Obama used his Executive Authority to appropriate the funding for CSR.

In May 2016, a federal judge ruled that President Obama did not have the authority to appropriate funding; funding can only be approved by Congress. While the Obama administration appealed the ruling, the case has been paused while the Trump administration considers its next steps. If it chooses to drop the appeal, then the ruling will stand and the subsidies will cease unless Congress authorizes them as required by the judge’s ruling.

Under the CSR, a silver plan with a $3,000 deductible, an enrollee earning 150 percent of poverty would only pay a $700 deductible.When considering options for 2018, enrollees who received this subsidy should be prepared for the CSR program to be reduced or eliminated, and they should factor in their new costs when considering their coverage options.

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