Cost-Sharing Reductions is one of two affordable health insurance options provided by the federal government (the other is Premium-Tax Credit). This option will help low and moderate income families who are not eligible for other programs to limit out-of-pocket costs, such as deductibles or coinsurance under their Qualified Health Plan (QHP) coverage.
Cost-Sharing Reductions Eligibility
The following eligibility criteria must be met to be eligible for cost-sharing reductions:
- Be eligible to enroll in a Qualified Health Plan (QHP)
- Meet the requirements for eligibility for a Premium Credit Tax
- Have an annual household income at or below 250% of the Federal Poverty Level (FPL)
- Be enrolled in a Silver-level QHP
Calculating the Cost-Sharing Reductions
Cost-Sharing Reductions are based on annual household income and family size.
For individuals and families with income below 250% of the FPL, their out-of-pocket maximum for a Silver plan (not including the premium) will be below the standard out-of-pocket maximum ($6,600 for individual and $13,200 for a family in 2015). In particular:
- for people with income from 100% to 200% FPL, the annual out-of-pocket maximum is $2,250 per individual and $4,500 per family
- for people with income from 200% to 250% FPL, the annual out-of-pocket maximum is $5,200 per individual and $10,400 per family
- for people with income above 250% FPL, the annual out-of-pocket maximum is the standard maximum, i.e., $6,600 per individual and $13,200 per family
Table 1 shows the out-of-pocket maximum for the Silver plan for a family of four depending on the percentage of the FPL. FPL equal to $24,250 is assumed (2015). The table is for states that approved Medicaid expansion.
Table 1 also displays the increased Actuarial Value. Actuarial value is the percentage of medical costs the plan covers. A lower out-of-pocket maximum result in increased actuarial value. The actuarial value of the Silver plan (70%) is increased as follows:
- At 400% of FPL, the Silver plan covers 70% of medical costs
- At 250% of FPL, the Silver plan covers 73% of medical costs
- At 200% of FPL, the Silver plan covers 87% of medical costs
- At 150% of FPL, the Silver plan covers 94% of medical costs
- At 138% of FPL, the Silver plan covers 94% of medical costs
For any household income equal or above 250% FPL, the Out-of-Pocket Maximum is the same as Standard Out-of-Pocket Maximum, and Actuarial Value is 70% – the Standard Silver plan AV.
Table 1. Out-of-pocket Maximum and “Increased” Actuarial Value (2016)
|Percent of Federal Poverty Level (FPL)||Household Income||Out-of-Pocket Maximum||Standard Out-of-Pocket Maximum||Actuarial Value (AV) for Silver Plan|
HealthCare.gov: Cost-Sharing Reductions
How the Loss of Cost-Sharing Subsidy Payments is Affecting 2018 Premiums
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