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.

BREAKING DOWN '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.
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