Why Should I Care About Cost Share Reductions?
The latest announcement by President Donald Trump regarding the Affordable Care Act probably had a lot of people Googling “Cost Share Reductions.” This cost-savings tool is a lesser-known benefit but equally important for people who purchase individual health insurance on the health insurance exchange.
President Trump’s announcement that he would immediately stop funding for the program could have widespread effects, including future increases on premiums. But what you need to know now is that your health insurance plan and prices for the rest of 2017 won’t change.
“We want people to know they won’t see an immediate change because 2017 prices are set and can’t change,” said Deb Muller, CEO of Avera Health Plans. “We are committed to ensuring people in South Dakota have access to affordable health insurance but this recent announcement creates more instability in an already unstable market.”
How it Works
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 expenses 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.
President Trump’s announcement means companies will no longer receive those payments. Members will receive the same benefit but Avera must find a way to cover the gap from the lost funding.
What it Means
- Cost share reductions are a key feature of the Affordable Care Act. Avera currently has 12,270 members who receive the benefit of cost share reductions or about 61 percent of members who get insurance through the Marketplace. These individuals are entitled to this benefit. What is being debated now is how this benefit will be funded.
- While prices are set for 2017, health insurance carriers still need to cover the loss of the government funding for cost share reductions and consumer premiums will increase in the future.
“Premiums are projected to increase nationally an additional 10 to 20 percent to fund these cost share reductions,” Muller said.
• Health insurance carriers may also opt to leave the federal Marketplace, resulting in fewer options for people seeking individual health insurance. To be part of healthcare.gov and continue offering individual plans on the Marketplace, insurance carriers must provide these cost share reductions to eligible individuals.
• This will also affect premium tax credits over time. Members who buy insurance on the Marketplace and meet certain income guidelines can also get tax credits to help reduce their monthly premium. Most people don’t know that these credits are calculated in part according to the second lowest local premium rate for a benchmark plan. If premium rates increase so will the premium tax credit people can receive.
• If you are not eligible for tax credits, Avera Health Plans offers policies off-exchange that will not incur the additional funding costs for cost share reductions. We encourage individuals to look at these options during the open enrollment period.
A Kaiser Family Foundation analysis estimates the increased cost to the federal government for higher premium tax credits would actually be 23 percent more than savings from eliminated cost-sharing reduction payments.
Despite this uncertainty, we still encourage you to keep your health insurance or to get insurance during open enrollment between Nov. 1 – Dec. 15. This is a short open enrollment period so it is important to make sure you make your health insurance decisions early for 2018.