Cost-sharing-reduction payments are made to insurance companies to offset some of their costs for providing discount health insurance plans to Americans who earn up to 200% of the federal poverty level (FPL). This insurance marketplace was set up by the Affordable Care Act (ACA) to provide about $7 billion to insurers to encourage them to continue offering the plans to lower-income people.
Now that cost-sharing subsidy payments have stopped, insurers still have to offer lower deductible plans to low-income consumers, but the tax-payers won’t be directly funding the $7 billion a year it costs to do that.
What Happens Now That Cost-Sharing-Reduction Payments Have Stopped?
Halting the payments is expected to lead to increases in premiums, as insurers will have to continue providing the subsidy to consumers. Insurers would still need to offer those plans with lower co-pays and deductibles to people who earn up to 250% of the FPL.
Some insurance companies may decide it is no longer worth selling health plans on the marketplaces as they will no longer be able to get financial help for the costs they are bearing.
Will All Consumers Feel the Higher Costs?
This only applies to consumers who get insurance on the individual market; this plan does not affect people who get coverage on the job or through a government program. If your income is low enough to qualify for a subsidy, you may not feel much of the impact because your subsidy will also go up as your premium does.
People who make too much income to qualify for the premium tax credits are the ones who really feel the brunt when premiums increase. However, this impact may be limited since some states specifically permit insurers to increase premiums due to cost-sharing reduction uncertainty.
What to Do: Shop Around or Consider a Healthshare Program
If you have a Silver plan and you’re not eligible for premium subsidies, compare the available plans during open enrollment to ensure you’re getting the best plan. In many states, the new rate increases will be concentrated on Silver plans, so Bronze or even Gold plans may be a much better value.
Regardless of which plan you have now, if the rates are jumping, definitely shop around. Note that you may have to change physician networks if you change plans, so make sure your doctor is in your new network if that is important to you.
A Healthshare program is also an alternative to health insurance that works in much the same way. Although it’s not health insurance, healthshares cost half or less than the cost of an unsubsidized health insurance policy. Healthshare members are also exempted from paying the ACA tax penalty.
Medical providers are accepting healthshares as an alternative to health insurance, so it is easier for patients to find exceptional medical care. You get a membership card once you enroll and you give your doctor the card when they ask for your insurance. To learn more about how healthshare programs work, we’ve created a video to make it easier to understand.
Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.