Affordable Care Act

The Truth About Cost-Sharing Reduction Subsidies

Updated on December 18, 2019

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When most people discuss Obamacare subsidies, they think of the premium tax credits that can help families and individuals with modest incomes afford their premiums. The IRS calls this a “refundable” tax credit because people can get a refund for it even if it exceeds the amount of tax they owed. It’s also an advance credit, so people who qualify can use it to directly pay their premiums without waiting for tax time.
Obamacare subsidies from tax credits differ from cost-sharing subsidies that the Affordable Care Act also put in place. According to CMS, over half of people who qualify for tax credits also qualified for cost-sharing reductions.

Understanding cost-sharing subsidies from the Affordable Care Act

An ACA cost-sharing reduction, also called a CSR, does not come as a tax credit. Instead, cost-sharing subsidies help lower the amount that plan members pay to use their Obamacare plan. These kinds of Obamacare subsidies have helped reduce the copays, deductibles, and coinsurance amounts included in a typical policy.
According to HealthCare.gov, these are important things to know about the way that a cost-sharing reduction works in 2018:

  • Applicants can find out if they qualify for a cost-sharing reduction when they first apply.
  • While Obamacare subsidies in the form of tax credits apply to any level of plan, cost-sharing subsidies only apply to the Silver level.
  • While a cost-sharing reduction mostly reduces such out-of-pocket charges as deductibles, copays, or coinsurance, they may also reduce the annual out-of-pocket limit.
  • Some groups of Native Americans may also qualify for additional cost-sharing subsidies.

Interested individuals can find a CSR calculator on HealthCare.gov to see if they qualify for a cost-sharing reduction. When you buy a plan on eHealth, we can also give you an estimate on how much you qualify for in subsidies. In general, CSR Obamacare subsidies go to people who make 250 percent of the federal poverty level or less. Judging by the federal poverty guidelines, an individual who earns about $30,000 or a family of four who earns somewhat over $60,000 could qualify. In contrast, people might qualify for an Obamacare tax credit if they make between 100 and 400 percent of the federal poverty level.

The future of cost-sharing subsidies in 2019

With the ACA still mostly intact, people can continue to rely upon premium tax credits in 2019. The future of qualifying for a CSR seems less clear. Prior to 2018, CSR payments from the federal government went directly to insurance companies in order to reimburse them for the added cost of offering policies with lower out-of-pocket expenses to qualified consumers. The Trump Administration stopped the direct payments for 2018; however, people could still get them.
According to the Kaiser Family Foundation, insurers simply adjusted premiums to allow for the extra costs that they didn’t get federal reimbursement for. In most states, insurance companies increased premiums only for Silver plans because those were the only options that offered the subsidies. A few states compelled insurance companies to spread the cost across all plans.

How to find affordable health insurance if cost-sharing subsidies change

While the impact of changes to Obamacare subsidies upon 2019 health insurance out-of-pocket costs and premiums isn’t totally clear yet, consumers might prepare for changes. Some people with modest incomes may find it premium to choose plans with lower limits and costs even if they pay a somewhat higher premium. The federal government still plans to fund premium credits.
In any case, eHealth will keep up with premiums and subsidies for Obamacare plans, so getting competitive quotes for health insurance there is a great place to start. Besides Obamacare health insurance, you can also obtain quick and accurate quotes for small group plans, short-term health insurance, and many other medical benefits. While the 2019 health insurance market will certainly change, you can rely upon eHealth for quick and reliable information.

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