Cost-Sharing Reductions

Definition of 'Cost-Sharing Reductions'


A type of federal subsidy distributed as discounts that help reduce out-of-pocket costs for health-care expenses, including:

  • Deductibles – the amount you owe for covered services before insurance kicks in;
  • Copayments – a fixed amount you pay for covered health-care services; and
  • Coinsurance – your share of the costs of covered health-care services.
The Cost-Sharing Reduction subsidy is a provision in the Patient Protection and Affordable Care Act, signed into law on March 23, 2010 by President Barack Obama.

Investopedia explains 'Cost-Sharing Reductions'


To qualify for Cost-Sharing Reductions, you must be ineligible for public coverage (Medicaid and Children’s Health Insurance Plan - CHIP), be unable to get qualified health insurance through an employer, and have a modified adjusted gross income that falls between 100% and 250% of the federal poverty level (FPL), as shown in the following table (as of 2014):

 

 

Family Size

100% FPL

250% FPL

1

$11,490

$28,725

2

$15,510

$38,775

3

$19,530

$48,825

4

$23,550

$58,875

5

$27,570

$68,925

6

$31,590

$78,975

7

$35,610

$89,025

8

$39,630

$99,075

 
As an example, assume you visit the doctor and are charged $100 for the visit. With your particular Silver plan, you have a $25 copayment. Because of the Cost-Sharing Reduction that you qualify for, you might only have to pay a $5 copayment. Likewise, if your plan normally has a $3,500 deductible, it may be reduced to only $500 because of Cost Sharing Reductions.
 
To qualify for Cost-Sharing Reductions (and/or the Advanced Premium Tax Credit, the second federal subsidy designed to help lower costs for health insurance coverage), you must purchase a Silver level plan through the Health Insurance Marketplace.




comments powered by Disqus
Hot Definitions
  1. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.
  2. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments.
  3. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
  4. Class Action

    An action where an individual represents a group in a court claim. The judgment from the suit is for all the members of the group (class).
  5. Retail Sales

    An aggregated measure of the sales of retail goods over a stated time period, typically based on a data sampling that is extrapolated to model an entire country. In the U.S., the retail sales report is a monthly economic indicator compiled and released by the Census Bureau and the Department of Commerce.
  6. Okun's Law

    The relationship between an economy's unemployment rate and its gross national product (GNP). Twentieth-century economist Arthur Okun developed this idea, which states that when unemployment falls by 1%, GNP rises by 3%. However, the law only holds true for the U.S.
Trading Center