Cost Sharing Reductions
When it comes to cost sharing reductions, we’re talking about the Affordable Care Act, which is also referred to as the marketplace or Obamacare. Basically, cost-sharing reductions apply to those with a low income (household income). Now that’s subjective, but the government built a chart for that based on the federal poverty level. For those who are within the 400 percent margin above the federal poverty level, they are going to get advanced tax credits for their premium reduction.
As for the people who are within 250 percent of the federal poverty level, they get a cost sharing reduction. Let’s say there are two individuals; one is at 300 percent of the federal poverty level, and one is under the 200 percent of the federal poverty level. They go purchase the same plan. Of course, the premiums are going to be different because of their income. Also, because of their income, their deductibles will be different for the same plan. In other words, their out-of-pocket maximums will be different.
For instance, the person at 300 percent gets a plan with a $6,000 deductible. The max out-of-pocket is $7,150. The person at 200 percent of the poverty levels deductible is $3,500, and the max out-of-pocket is $5,000.
Let’s say we have a third individual who’s at 150 percent of the federal poverty level. Their deductible will be reduced to $500, and their max out-of-pocket is $2,000. If you fall within a certain range of the federal poverty level, your deductible will be 100 percent of what the new deductible actually is and so on and so forth. It really makes a difference for people. They can afford the plans now because of the advanced premium tax credits. The premiums and deductibles make health plans unaffordable for many, so the tax credits and cost shares help bring the deductibles and max out-of-pockets down.
Must Have a Silver Plan
Now, there’s one catch to cost sharing reductions. You can’t just use any plan; you have to choose a silver plan. With a silver plan, the deductible could be $6,000 with a max out-of-pocket of $7,150. Even though a bronze plan may be zero premium versus a silver plan that may be $100 a month, you can’t choose a bronze plan. You also can’t get a gold plan or a platinum plan. So in order to get cost sharing reductions, along with your advanced tax credits, you have to be within 250 percent of the federal poverty level.
How to Sign Up for Cost Sharing Reductions
Go to healthcare.gov and create an account. Going through the hectic process on one’s own can be frustrating. Therefore, you should contact your agent. They’ll know how to do the process because they’ve likely been doing it for years. Most agents also use an engine that helps retrieve information and complete the process quickly. With an agent, you’ll get the coverage you need right away.
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