By Michelle Andrews
Mon, Dec 19 2011
When people talk about health insurance affordability, they typically focus on premiums, the sticker price for a policy. For the plans being sold through the online health insurance marketplaces next year, much of the discussion has been on tax credits that can reduce the monthly premium for people with incomes up to 400 percent of the federal poverty level ($94,200 for a family of four in 2013).
But the Affordable Care Act also established another type of financial assistance for people who buy plans on the marketplaces, also known as exchanges. Cost-sharing subsidies can substantially reduce the deductibles, copayments, coinsurance and total out-of-pocket spending limits for people with incomes up to 250 percent of the federal poverty level ($58,875 for a family of four in 2013). Those reductions could be an important consideration for lower-income consumers when choosing their coverage.
"Particularly for people who have to utilize a high amount of services, the reduction in total out-of-pocket costs" can be important, says Dana Dzwonkowski, an expert on ACA implementation at the American Cancer Society’s Cancer Action Network.
Cost-sharing reductions will be applied automatically for consumers who qualify based on their income, but only if they buy a silver-level plan, considered the benchmark under the law.
Silver plans are one of the four categories that will be sold on the exchanges, each named for a precious metal. Premiums for the plans will vary, and each will offer a different level of cost sharing for the consumer through deductibles and copayments, among other things. A silver plan will generally pay 70 percent of covered medical expenses, leaving the consumer responsible for 30 percent.
The insurer will typically cover 60 percent of expenses in a bronze plan, 80 percent in a gold plan and 90 percent in a platinum plan. All exchange plans will offer a similar package of comprehensive services that cover 10 so-called essential health benefits and cover certain types of preventive care at 100 percent.
The federal cost-sharing subsidies essentially increase the insurance company's share of covered benefits, resulting in reduced out-of-pocket spending for lower-income consumers. A family of four whose income is between 100 and 150 percent of the federal poverty level ($23,550 to $35,325) will be responsible for paying 6 percent of covered expenses out-of-pocket compared with the 30 percent that a family not getting subsidized coverage would owe in a silver plan. A family with an income between 150 and 200 percent of the poverty level ($35,325 to $47,100) will be responsible for 13 percent of expenses, and one with an income between 200 and 250 percent of the poverty level will be responsible for 27 percent ($47,100 to $58,875).