Cost-Sharing Subsidies in Federal Marketplace Plans
Most health plans require enrollees to pay a portion of the cost of care when they seek services, in addition to any premium that they must pay for the plan. Plans generally have several forms of cost sharing, including deductibles, which must be paid by patients before the plan begins paying toward some or most services, and copayments or coinsurance, which must be paid by patients at the time they receive services. A recently published KFF brief describes the major cost sharing provisions of the bronze, silver, gold and platinum health plans available through the federal Marketplace.
For people with low and modest incomes, the Affordable Care Act (ACA) provided for reduced cost sharing if enrollees select a plan from the silver tier in the federal or state marketplace. The cost-sharing reductions are accomplished by requiring insurers to create variants of each standard silver plan, with each variant meeting a successively higher actuarial value.1 A plan’s actuarial value is the percentage of the cost of covered services that the plan is expected to pay on average for the health care services of a typical group of enrollees. A higher actuarial value means that the share of costs (i.e., the deductibles and other cost sharing) borne by plan enrollees is reduced.
Under the ACA, standard silver plans are expected to have an actuarial value of 70 percent, which means that the plan is generally expected to pay for 70 percent of the cost of all covered services for people enrolled in the plan, and enrollees are expected, on average, to pay 30 percent of the costs of services through cost sharing, such as deductibles, copayments and coinsurance. Note that these percentages apply over the whole group and will vary significantly across different enrollees; for some the plan will pay none of their costs and for others the plan may pay almost all of them.
People with low and moderate income can qualify for one of the reduced cost-sharing silver plan variants. People with incomes less than or equal to 150% of the federal poverty level (FPL) can enroll in a plan where the actuarial value is increased to 94%; people with incomes between 150 and 200% FPL can enroll in a plan where the actuarial value is increased to 87%; and people with incomes between 200 and 250% FPL can enroll in a plan where the actuarial value is increased to 73%. These variants are referred to as CSR94, CSR87 and CSR73 plans in the slides below. A fourth variant is a zero cost-sharing plan that is as available to certain Native Americans.2
Insurers have discretion in how they reduce cost sharing in their standard silver plans to meet the meet the higher actuarial value, subject to a few constraints. Generally, the cost sharing for a service that is an essential health benefit in a reduced cost-sharing variant cannot be higher than the cost sharing for the same service in the standard silver plan or in another variant of the plan with a lower actuarial value. As examples, if the primary care office visit copay in the standard silver plan is $40, the copay in any CSR variant must be $40 or lower; if the coinsurance percentage for a preferred drug in the CSR 73 variant is 20%, the corresponding coinsurance rates in the CSR87 and CSR94 variants can be no more than 20%.
In addition, the ACA provides for lower out-of-pocket limits in the cost-sharing reduction variants than in other plans. An out-of-pocket limit is the most that an enrollee must pay for cost sharing under a plan for covered health care services received from network providers. After an enrollee reaches his or her out-of-pocket limit, the plan pays all of the costs for covered services provided in network. For 2015, the maximum out-of-pocket limit for plans (other than grandfathered plans) is $6,600 for single coverage and $13,200 for family coverage. For the cost-sharing variants, the maximum out-of-pocket limit is $2,250 for single coverage and $4,500 for family coverage for the CSR87 and CSR94 plan variants, and $5,200 for single coverage and $10,400 for family coverage for the CSR73 plan variant.
The slides below show the average cost-sharing amounts for standard silver plans and for the cost-sharing variants for each category of enrollee cost sharing. The categories are described in more detail here. As expected, what we see is a general pattern of declining average cost-sharing amounts in each service category as the actuarial value of the variants increases. As examples:
- For plans with a combined deductible for medical and prescription expenses, the average annual deductible amount is $2,559 for standard silver plans, $2,078 for CSR73 plans, $737 for CSR87 plans, and $229 for CSR94 plans.
- For primary care office visits, the average copayment amount (for plans with copayments) is $28 for standard silver plans, $23 for CSR73 plans, $17 for CSR87 plans, and $14 for CSR94 plans.
- The average out-of-pocket limit for single coverage is $5,824 for standard silver plans, $4,622 for CSR73 plans, $1,691 for CSR87 plans, and $879 for CSR94 plans.
For those who qualify, these reduced cost-sharing plans can meaningfully reduce the financial burden of receiving medical care. In particular, the CSR87 and CSR94 plan variants have much lower deductibles and out-of-pocket limits as compared to standard silver plans, and can result in thousands of dollars of savings for individuals and families who have significant medical events or ongoing medical needs.
Data were downloaded from the Data.HealthCare.gov 2015 QHP Landscape file, “Health plan information for individuals and families” on [January 26, 2015]. Plans analyzed include those offered in 2015 in the 37 states using Healthcare.gov (which includes federally facilitated and partnership Marketplaces, as well as Oregon, New Mexico and Nevada).
Child-only and catastrophic plans were removed, and the remaining unique records (those with identical plan marketing names and cost-sharing structures) were collapsed by state, thereby removing duplications where the same plans are offered in multiple counties within the state. The analysis does not include variations on cost sharing made available through cost-sharing reductions for lower income enrollees and Native Americans.
The analysis relies on data downloaded through Healthcare.gov. In the course of doing this analysis, we found instances where the summary descriptions of cost sharing did not necessarily match information in the plan brochures and SBCs. We did not attempt to verify each description and did not alter any of the information from the downloaded file, which means that some of the plans may be misclassified for certain cost-sharing provisions.
Averages are simple averages and not weighted by enrollment as plan-level enrollment data are not publically available.
The federal government reimburses insurers for the costs associated with reducing the cost sharing.
See 45 CFR 156.420 and Table 4, HHS Notice of Benefits and Payment Parameters for 2015, https://www.federalregister.gov/articles/2014/03/11/2014-05052/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2015