How do cost-sharing reductions work?

  • Individuals and families with income between 100 percent and 250 percent of the federal poverty level (FPL) can also get help paying out-of-pocket costs for services covered by their plan. The extra help, known as “cost-sharing reductions,” lowers the out-of-pocket limit and increases the level of coverage under the plan.
  • Unlike the premium tax credits, cost-sharing reductions can only be obtained with a Silver-level plan. If you buy a plan in another metal tier, you will not get the out-of-pocket help.
  • Three levels of cost sharing reductions are based on an individual or families’ income level
  • With cost-sharing reductions, the federal government should pay the insurer upfront.
  • Cost-sharing charges are automatically reduced when an eligible individual enrolls in a Silver plan.
  • Cost sharing reductions are not tax credits. Additionally, unlike premium tax credits, if your income goes up so that you would no longer qualify for cost-sharing reductions, you will not have to repay that out-of-pocket help when you file taxes.
  • A Silver plan without this help would cover, on average, 70 percent of a person’s medical costs over the course of the year, with the consumer paying the rest in deductibles, co-pays and co-insurance. A Gold plan covers, on average, 80 percent of a consumer’s costs and a Platinum plan covers, on average, 90 percent of a consumer’s costs. The cost-sharing reduction increases the generosity of the plan so that those with income between 100 and 150 percent FPL get a plan that is better than a platinum plan (covering on average 94 percent of costs). Those with income between 150 percent and 200 percent FPL get a plan that is almost as generous as a Platinum plan (covering 87 percent of costs), and those with income between 200 percent and 250 percent FPL get a plan that is slightly better than a Silver level plan (covering 73 percent of costs).