Explaining Cost-Sharing Reductions and Silver Loading in ACA Marketplaces

The House of Representatives recently passed a budget reconciliation bill that would appropriate funding for cost-sharing reductions that insurers are required to provide to low-income enrollees in the Affordable Care Act marketplace. This brief explains what these cost-sharing reductions are, how they relate to federal spending, and what effect appropriating funding might have on premiums and the uninsured rate.

What are cost-sharing reductions?

The Affordable Care Act (ACA) has two types of financial assistance for lower-income enrollees: assistance with monthly premiums (“premium tax credit”) and assistance with out-of-pocket expenses when people get medical care or fill a prescription (“cost-sharing reductions”).

The ACA requires insurers to offer plans with reduced patient cost-sharing (e.g., deductibles and copays) to marketplace enrollees with incomes between 100 and 250% of the poverty level (an annual income of $15,650 to $39,125 for a single person in the contiguous U.S.). The reduced cost-sharing is only available in silver level plans, and the premiums are the same as standard silver plans.

The cost-sharing reductions (CSRs) significantly lower deductibles in these plans: for plans where there is a combined deductible for medical care and prescription drugs, the average deductible is reduced for those with incomes below 150% of poverty from $4,902 to $87; for those with incomes between 150% and 200% of poverty, the average deductible is reduced to $682; and for enrollees with incomes between 200% and 250% of poverty, the average deductible is $3,620.

During the Obama administration, from the start of ACA implementation in 2014, the federal government paid insurers directly to offset the cost-sharing reductions. To compensate for the added cost to insurers of the reduced cost-sharing, the federal government was making 7 billion dollars in annual payments directly to insurance companies by 2017.

In 2016, a federal district judge ruled that direct CSR payments without explicit congressional appropriation were illegal, but stayed the ruling after it was appealed by the Obama administration. However, in October 2017, the Trump administration stopped the appeals process and chose to end the CSR payments, saying at the time the ACA was “dead.”

What is silver loading?

In response to the federal government ending cost-sharing reduction payments, most insurers raised silver premiums substantially to compensate for the loss of CSR payments. Most states either allowed or encouraged insurers to “load” the cost of CSRs onto silver premiums only (not onto other metal levels), since silver plans are the only plans where cost-sharing reductions are available. The practice of increasing silver plan premiums to compensate for the loss of federal CSR payments is known as “silver loading.” From 2017 to 2018, average benchmark silver plan premiums rose by about 17 percentage points more than bronze premiums did.

In August 2018, the Trump administration issued guidance encouraging state regulators to allow insurers to increase only the premium on silver plans offered on-exchange, so that off-exchange silver plans could be priced lower. The 2026 Notice of Benefit and Payment Parameters (issued by the Biden Administration in January 2025) codified the practice of silver loading so long as it is permitted by the state regulator and the insurer does not receive other reimbursements for cost-sharing reductions.

What is the cost of silver loading to the federal government?

While the federal government saved money by no longer making CSR payments, those savings were offset by higher payments for premium tax credits that result from silver loading. That is because the ACA’s premium tax credits are based on the premium for a benchmark plan in each area: the second-lowest-cost silver plan in the marketplace. The premium tax credit is calculated as the difference between the premium for that benchmark plan and a premium cap calculated as a percent of the enrollee’s household income. Any systematic increase in premiums for benchmark silver plans increases the amount of premium tax credits.

The increased tax credits completely cover the increased premium for subsidized enrollees covered through the benchmark silver plan. Enrollees who apply their tax credits to other plans (e.g., bronze, gold, or other silver plans) would also receive increased premium tax credits even if they do not qualify for reduced cost-sharing and even if the underlying premiums in their plans might not have increased at all. After 2017, increased premium tax credits allowed many more individuals to purchase bronze – and sometimes even gold – plans with zero out-of-pocket premium costs.

For this reason, ending federal payments for cost-sharing reductions ended up costing the federal government more money than if the cost-sharing reduction payments had continued. Additionally, subsequent research has pointed to the practice of silver loading having an upward effect on ACA Marketplace enrollment.

An August 2017 CBO report projected that ending CSR payments would increase the federal deficit by $6 billion in 2018, $21 billion by 2020 and $26 billion by 2026, and added that after taking premium tax credits into account, most enrollees would pay similar or lower premiums than they had been paying before.

What does the House reconciliation bill do with CSR funding?

The budget reconciliation bill passed by the House in May 2025 appropriates funding for cost-sharing reductions, returning to the pre-2017 federal payment system practice. The bill does not explicitly ban silver loading, but if insurers receive federal CSR payments, they will no longer have a justification to silver load under current regulations.

The bill also bans federal CSR payments to insurers for Marketplace plans that include coverage for abortion, which will raise conflicts with state laws in a dozen states requiring abortion coverage. It is not yet clear how those states will respond (e.g., whether they will restrict abortion coverage in ACA marketplace plans and allow insurers in their state to receive federal cost-sharing reduction payments).

Although the federal government would resume CSR payments to insurers, this is expected to reduce the federal deficit by effectively ending silver-loading, thus lowering benchmark silver plan premiums, which in turn reduces the dollar amount of premium tax credits paid out to subsidized enrollees.

What might be the effect on premiums and enrollment?

Premiums for silver plans – before accounting for premium tax credits – are expected to decrease as silver-loading would no longer be necessary if funding for CSRs is appropriated. Given that silver premiums rose by about 17 percentage points more than bronze plans did in 2018, it is likely there could be a similar drop in gross premiums for silver plans if this legislation passes. Meanwhile, funding CSRs is likely to have little or no effect on what insurers charge for bronze and gold premiums (before accounting for the premium tax credit).

However, the vast majority of ACA Marketplace enrollees receive a premium tax credit and therefore do not pay the gross premium. Generally speaking, subsidized enrollees who pick a silver level plan may see no difference in their monthly out-of-pocket premium payments resulting from the funding of CSRs. Meanwhile, enrollees who pick a bronze or gold level plan will likely pay more for their monthly premium. This is because bronze and gold gross premiums would be unaffected, while the total amount of the premium tax credit is smaller, resulting in people in those plans paying more than they would have with silver loading.

Because enrollees in bronze and gold plans would face higher premium payments if CSRs are appropriated, it’s likely some of these enrollees would drop their coverage, thus having an upward effect on the uninsured rate. The enrollees who drop their coverage as a result of CSR appropriation are likely to be middle-income people (those making between two and four times the poverty level).

However, the appropriation of CSRs is just one of many changes the reconciliation package makes to the ACA Marketplaces. Other provisions of the budget reconciliation, as well as expiring enhanced subsidies, will have separate effects on premiums and the amount of financial assistance enrollees receive.