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Published on August 04, 2017

cost sharing illustration

Health Insurance: Why the Future of Cost Share Reductions Matters

Even though a bill to repeal and replace the Affordable Care Act failed to move forward in the Senate in July, there is still some uncertainty that could affect premiums for 2018.

One key gray area is cost share reductions. A cost share reduction is available to people who meet income guidelines and enroll in certain plan types. This helps cover the cost of their out-of-pocket costs such as their deductible, coinsurance and co-pays.

For example a person’s $2,000 deductible could be decreased to $750 through a cost share reduction. The federal government pays the difference in the deductible when the member receives care. If the money isn’t spent, the federal government pays nothing for that member.

“Cost share reductions are a relatively minor part of the ACA, it was barely a paragraph long,” said Deb Muller, CEO of Avera Health Plans. “It may in fact be a pivotal point for the ACA in 2017 and beyond.”

The issue of CSR payment went to court with Congress arguing that no funding was created to fund the program. The district court found that the program must have a funding mechanism in order to fund cost share reductions.

Since the ruling, the federal government has provided no clear answers regarding the future of cost share reductions. If a decision is made to not fund the program, federal payments could stop immediately. In such a case, health insurance companies would need to cover what the federal government will no longer provide.

To be part of and continue offering individual plans on the Marketplace, insurance carriers must provide these cost share reductions to eligible individuals. In 2018, it’s estimated there will be an estimated $10 billion in cost savings reductions nationally.

“We need some stability in the market,” Muller said. “Once they decide if they will fund CSRs through 2017 and into 2018, we can solidify our premiums for the coming year. Premiums are projected to increase nationally an additional 10 to 15 percent to fund these cost share reductions.”

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