What is Cost-Sharing?
Cost-sharing in health insurance is your share of costs (copays, coinsurance, deductible, out-of-pocket maximum) for covered benefits in a policy period. Typically cost-sharing does not apply to Premiums, uncovered costs, or balance billing.
TIP: In simple terms, cost-sharing describes your share of the costs vs. your insurer’s share of the cost in respect to your health insurance.
Why is Cost Sharing Important?
When people think of health insurance costs, they think about their monthly premium. The truth of the matter is that the majority of health care spending is on health care services and not monthly premiums. Given this it is important to get a health plan that provides cost-sharing that will result in maximum out-of-pocket savings over a policy period (typically a calendar year under the ACA).
TIP: You can use tax credits to lower your premium and cost-sharing reduction subsidies to lower out-of-pocket cost-sharing amounts.
Cost Sharing and ObamaCare
Cost-sharing keeps premiums low, but it can also deter people from seeking the care they need due to high up-front costs on lower-premium plans. For this reason, the Affordable Care Act requires all plans to provide minimum benefits, minimum protections, and minimum value. In short, this means plans have to cover at least an average of 60% of covered costs and must provide services from ten categories of minimum benefits (some basics without cost-sharing at all).
Cost Sharing Reduction Subsidies
Under ObamaCare Cost Sharing Reduction subsidies are offered on Silver Plans purchased on the Health Insurance Marketplace to those making between 100%-250% of the Federal Poverty Level.