The Effect of the ACA's Cost-Sharing Reductions on Out-of-Pocket Costs

The Affordable Care Act’s cost-sharing reductions vary by plan making the out-of-pocket costs for the qualifying patients very different.

The Affordable Care Act’s (ACA) cost-sharing reductions vary by plan making the out-of-pocket (OOP) costs for the qualifying patients very different, found a new study by The Commonwealth Fund.

After examining the plans available in the largest markets in 38 states, researchers found that cost-sharing reductions substantially lower copayments for primary care and specialist visits, generic and preferred drugs, and emergency room visits. But what determines the reductions depends largely on each individual’s plan.

“The Affordable Care Act’s cost-sharing provisions will reduce out-of-pocket costs substantially for low- and moderate- income people,” Sara Collins, the lead author, said in a statement. “However, because health insurance plans are so different, how much your potential costs drop depends on where you live and how much care you need. Making plan design more consistent could simplify plan choice and help equalize costs for people across states.”

Cost-Sharing Reductions on Silver Tier Plans

The authors studied the effects of cost-sharing reductions on projected 2016 out-of-pocket costs for the people who qualify for them. The study group included hypothetical 40-year-old, nonsmoking males. While one group had an annual income of $17,000, $20,000, and $25,000, making them eligible for the reductions, the other group earned $35,000, which is above the qualifying threshold. The two groups were then compared.

Based on the silver tier plans, it was found that the cost-sharing reductions had several benefits.

  • They lowered deductibles by thousands of dollars.
  • They also reduced OOP limits. The median annual spending limit for the silver plan is $6500. However, for lower income people, the limit is reduced to $5000.
  • They reduced copayments and coinsurance too.
  • They had most benefits in terms of OOP costs for people who used the most health care.

Limiting OOP Costs for Lower Income Individuals

Health insurers selling plans in the ACA’s marketplaces are required to reduce cost-sharing in silver plans for low- and moderate-income people earning between 100% and 250% of the federal poverty level. In 2016, as many as 7 million Americans may have plans with these cost-sharing reductions.

“We know that when people have health insurance but their deductibles, co-pays, and other costs are more than they can afford, they don’t get the care they need,” said David Blumenthal, MD, president of The Commonwealth Fund.

By 2017, the CMS will give insurers the option of offering a set of standard plans in the federal marketplaces that feature fixed deductibles, out-of-pocket limits, and copayments for health care services. The plans would also exclude a defined set of services from the deductible.

“This study shows that features of the ACA are working to make health care more affordable for many Americans,” Dr Blumenthal said. “But we must continue to find ways to ensure that those with limited resources have adequate protection against the high cost of health care.”