Late last week the Trump administration announced they will stop funding the “cost-sharing reduction” subsidies in the Affordable Care Act.
So what does that actually mean? What impact will it have on you? (Again, we’re avoiding politics here, to be clear!)
What are cost-sharing reductions?
In the Affordable Care Act, there are two types of subsidy payments that are available to those who qualify:
- Premium Tax Credits. These are the subsidies that lower the monthly premium for those whose household income is between 100% and 400% of the Federal Poverty Level (FPL). These have not been altered at all.
- Cost Saving Reductions. These are subsidies that lower the out-of-pocket costs (deductibles, copays, that sort of thing) of those whose household income is between 100% and 250% of the Federal Poverty Level. They only apply to Silver level plans.
Obviously, it is this second type of subsidy that has been cut off by the Administration.
Will this change impact Obamacare policyholders?
No. Insurance companies are obligated to honor the cost-saving reductions anyway, so this decision really just amounts to the government not paying them to do so. If you qualify for Cost-Saving Reductions, you will still benefit from the lower out-of-pocket costs on Silver plans.
Some insurance companies on the Marketplace planned their rates with the assumption that Cost-Saving Reductions would not be paid. BlueCross BlueShield of South Carolina is among them. That’s why it’s very important that if you do not qualify for subsidies, you enroll outside the Marketplace!
(In other words, the silver plans on the Marketplace have much higher premiums, to cover for the money that will not be coming in from the government for cost-sharing reductions. Because the premium tax credit subsidies rise with the cost of the silver plans, those who qualify won’t really feel any impact from this at all.)
Don’t forget Open Enrollment begins on November 1, at which point we’ll be able to access plans and prices to see how this is all going to look. We’re all over it, so plan to contact us to talk about your needs and situation.