What Is a Cost-Sharing Reduction (CSR) Health Plan?

A Cost-Sharing Reduction (CSR) health plan offers financial assistance designed to make healthcare more affordable. These plans reduce the amount individuals must pay for medical services once they receive care. Often referred to as “extra savings,” CSRs aim to lower the financial burden associated with healthcare costs for eligible individuals and families.

Understanding Cost-Sharing Reductions

Cost-sharing reductions lower out-of-pocket expenses for medical care, such as deductibles, copayments, and coinsurance. They also reduce the maximum annual amount an individual or family pays for covered services. These reductions are distinct from premium tax credits, which lower the monthly premium cost of health insurance. While premium tax credits address upfront coverage costs, CSRs focus on reducing expenses incurred when healthcare services are used.

Eligibility for Cost-Sharing Reductions

To qualify for cost-sharing reductions, individuals must meet income criteria and enroll in a specific health plan. Eligibility is for those with household incomes between 100% and 250% of the Federal Poverty Level (FPL). In states with expanded Medicaid, the income range for CSR eligibility typically begins above 138% of the FPL, as individuals below that threshold usually qualify for Medicaid. A requirement for receiving CSRs is enrollment in a “Silver” category health plan through the Health Insurance Marketplace. Eligibility is determined based on the household’s projected income for the coverage year, compared against prior year’s FPL guidelines.

How Cost-Sharing Reductions Function

Cost-sharing reductions enhance the actuarial value of a Silver health plan. A standard Silver plan typically covers about 70% of a typical population’s medical expenses. With CSRs, this value increases, making the Silver plan behave like a plan with a higher metal level, such as Gold or Platinum, in terms of out-of-pocket costs.

The degree of reduction depends on the enrollee’s income relative to the FPL. For instance, if an individual’s income is below 150% of the FPL, their Silver plan’s actuarial value can be boosted to 94%. For those with incomes between 150% and 200% of the FPL, the value increases to 87%, and between 200% and 250% FPL, it rises to 73%. This enhancement translates into lower deductibles, reduced copayments for doctor visits, lower coinsurance percentages, and a lower annual out-of-pocket maximum.

Accessing a Plan with Cost-Sharing Reductions

Individuals interested in a health plan with cost-sharing reductions must apply through the Health Insurance Marketplace. This can be done via HealthCare.gov or a state-based marketplace. The application requires providing information about household size and estimated income for the upcoming year.

The marketplace system automatically assesses eligibility for both premium tax credits and cost-sharing reductions. If an applicant qualifies for CSRs, the system indicates these “extra savings” and presents the enhanced Silver plans. Applicants receive an Eligibility Determination Notice confirming their qualification for lower out-of-pocket costs, specifically noting if they can choose a plan with reduced deductibles, copayments, and coinsurance.