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Did you know that there are two types of health insurance subsidies available under the Affordable Care Act? Many people are familiar with premium tax credits, the subsidy that helps reduce monthly premium payments when taken in advance or reduces premiums annually when deducted at tax time. But what about cost-sharing reductions?
Cost-sharing reductions are another type of Obamacare subsidy that helps lower an insured person’s share of healthcare costs beyond their plan premium, including:
Cost-sharing reductions apply only to silver plans and impact a plan’s actuarial value. At each metal level, health insurance plans are assigned an actuarial value that reflects cost sharing between the plan and the enrollee. For example, a silver plan has an actuarial value of 70 percent, which means the plan is generally responsible for 70 percent of covered services and the enrollee is generally responsible for 30 percent of covered expenses.
Kaiser points out that insurers have discretion in how they reduce cost sharing to meet the higher actuarial value but are subject to certain constraints. For example, an insurance company cannot make cost-sharing reductions for an essential health benefit in one plan variant higher than cost sharing for the same service in the standard silver plan or another plan variant with a lower actuarial value. You can read more at kff.org.
Cost-sharing reductions are much like premium tax credits in that you must:
However, unlike premium tax credits, cost-sharing reductions are only available to those:
Cost-sharing reductions can significantly reduce out-of-pocket healthcare spending for eligible individuals and families. To take advantage of this subsidy, however, you must apply for it and enroll in a silver plan. A silver plan may sound more expensive, but don’t rule it out. Once you compare several plan options and calculate your estimated premium tax credit, you may find you could spend less on healthcare with a silver plan and cost-sharing reductions.
If you need assistance selecting an ACA-compliant plan, you can speak with an IHC representative who is also an Obamacare certified adviser by calling 888-839-7679.
If your family size or income changes throughout the year, you must report these changes to the health insurance exchange through which you enrolled in coverage and applied for a subsidy. Failure to do so could mean repayment of excess subsidy received—it could also mean missing out on additional subsidy amounts for which you could be eligible.
If you find you are not eligible for any Obamacare subsidies, neither premium tax credits nor cost-sharing reductions, you may want to explore on- and off-exchange coverage options to stretch your healthcare dollars.
 Claxton, Gary and Nirmita Panchal. “Cost-Sharing Subsidies in Federal Marketplace Plans.” The Henry J. Kaiser Family Foundation. Feb. 11, 2015. http://kff.org/health-costs/issue-brief/cost-sharing-subsidies-in-federal-marketplace-plans/