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Small Business Employee Benefits and HR Blog

FAQ - What are the ACA Cost Sharing Subsidies?

August 5, 2014
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Under the Affordable Care Act, cost sharing subsidies, or cost sharing reductions (CSRs), are discounts for lower-income families to help with out-of-pocket medical expenses. This article provides frequently asked questions (FAQs) about the ACA cost sharing subsidies.

cost sharing subsidiesWhat Are the Cost Sharing Subsidies?

The cost sharing subsidies are designed to help individuals and families pay for their deductible, co-insurance, and co-payments. The cost sharing subsidies are available in addition to the premium tax credits, which help eligible individuals pay for their monthly health insurance premium.

The cost sharing subsidies essentially allow individuals and families to pay for a standard silver plan, but get richer benefits.

Who Qualifies for a Cost Sharing Subsidy?

A cost sharing subsidy is available to households who:
  • Have an income between 100 and 250 percent of the federal poverty line (FPL). This is equivalent to an individual earning $29,175 in 2014, or a family of four earning $49,475.

  • Purchased a “silver” health plan from their state’s Health Insurance Marketplace.

  • Do not have access to affordable health insurance through work or a government program.

Those who are members of a federally recognized tribe are also eligible for cost sharing subsidies.

What Is a Silver Plan?

Individual health insurance plans are divided into four metallic tiers. The tiers include: bronze, silver, gold, and platinum. With a silver plan, the insurance company typically covers 70 percent of covered expenses.

How Much Are the Cost Sharing Subsidies?

The cost sharing subsidies reduce the amount a family pays for out-of-pocket expenses and are based on household income and composition.

  • A family of four whose income is between 100 and 150 percent of the federal poverty level ($23,850 to $35,775) will be responsible for paying six percent of covered expenses out-of-pocket - compared with the 30 percent without cost sharing subsidies.

  • A family with an income between 150 and 200 percent of the poverty level ($35,775 to $47,700) will be responsible for 13 percent of expenses.

  • A family with an income between 200 and 250 percent of the poverty level ($47,700 to $59,625) will be responsible for 27 percent of expenses.

Here's a video from Healthcare.gov explaining the cost sharing subsidies.

Video Courtesy of Healthcare.gov

What Out-of-Pocket Expenses Do the Cost Sharing Subsidies Cover?

The cost sharing subsidies are applied to the following out-of-pocket expenses:

  • Deductible: the amount paid for covered care before the insurer begins to pay. For example, a family or individual may have to pay $500 out-of-pocket for covered services before the insurance company pays; this would be a $500 deductible.

  • Co-payment: a set dollar amount paid to the health care provider for a covered service. For example, there may be a $30 co-payment for a doctor’s visit.

  • Co-insurance: the percentage of allowed charges for covered services a family or individual is required to pay. For example, if an insurer is responsible for 80 percent of charges for a service, the family or individual would be responsible for the remaining 20 percent.

Questions about cost sharing subsidies? Leave a comment and we'll help answer them.

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