ACA Cost-Sharing Reductions Help Low-Income Working Families

The Congressional Budget Office recently released an analysis of the potential consequences if the Trump Administration stops funding cost-sharing reductions (CSRs) on Affordable Care Act (ACA) health insurance marketplaces. A lot has already been said about the impact on premiums, federal spending, and consumer plan choice that the CBO projects would result. But what is often missing from the debate and the media coverage is a better understanding of who is helped by CSRs and what that help looks like. As the debate continues to unfold in the coming months, here are a few key facts to remember.

CSRs help working families with low incomes afford health care. In addition to monthly premiums, most consumers also pay deductibles and copays or coinsurance or both when they see the doctor or use other health care services. These out-of-pocket costs often keep people from seeking needed care, especially those without income to spare. The ACA sought to address this problem by enabling consumers with low incomes purchasing insurance through the marketplaces to enroll in “enhanced” health plans (we’ll call them CSR plans here). These plans reduce what consumers pay in deductibles, copays, and coinsurance without subjecting them to the higher premiums usually associated with plans that offer lower out-of-pocket costs.

In California, consumers are eligible for a CSR plan (PDF) through the state’s health insurance marketplace, Covered California, if they earn roughly $17,000 to $30,000 a year (for an individual) or $34,000 to $61,000 (for a family of four). (It’s important to note that CSRs are only available when consumers purchase silver tier plans.) The federal government pays health insurance companies directly to provide CSR plans on the exchanges. These are the payments the Trump Administration is threatening to stop.

About 670,000 Californians are enrolled in CSR plans. These are Californians who earn too much to be eligible for Medi-Cal but still may struggle financially. These families may not get health benefits from an employer, or if their employer offers health coverage, it may be unaffordable. According to the State Health Access Data Assistance Center, typical jobs among Californians who earn incomes that would qualify them for CSR plans include administrative assistant, retail and restaurant worker, home health aide, nursing assistant, and child care worker. Many receiving help from CSR plans are self-employed or work at small businesses. Self-employed Californians and individuals working for businesses with 50 or fewer employees disproportionately rely on insurance through Covered California with premium subsidies, according to this analysis from the UC Berkeley Center for Labor Research and Education (PDF). And nearly three-quarters of Covered California enrollees with premium subsidies are also eligible for cost-sharing reductions.

The map below shows the geographic distribution of Covered California enrollees in CSR plans; hover over each county to see the numbers.

CSR plans can shield consumers from hundreds or thousands of dollars in medical expenses in a given year. Some illustrations from Covered California:

  • On average, CSR plans saved households $1,500 a year (PDF) on health care in 2016.
  • A CSR plan lowers by $2,000 (PDF) what a consumer would pay for a common injury (a broken wrist), compared to a similar plan without CSRs.
  • CSR plans are most valuable to consumers when the health threat is most extreme. Out-of-pocket expenses are most damaging when consumers experience a devastating illness or accident that leaves them needing a lot of medical care. Take a look at a Covered California consumer who earned $17,000 in 2016. With a CSR plan, the annual deductible was $75 versus $2,500 (PDF) for a similar plan without CSRs. The total out-of-pocket maximum was capped at $2,350 versus $6,800 without CSRs. In the event of a serious medical emergency or series of high-cost medical events, a CSR plan would have shielded that consumer from another $4,450 in expenses.

CSRs provide a stabilizing influence on the entire health care safety net. Californians with low incomes often move back and forth between Medi-Cal and Covered California. In one year, their income is low enough to qualify them for Medi-Cal. In the next, they make a little more money and leave Medi-Cal for a Covered California plan. But to afford marketplace coverage, they need premium support plus the lower out-of-pocket costs provided by CSR plans. CSR plans support a broader system that helps provide a continuum of coverage for Californians with low incomes through changing life situations. That extra dose of stability not only benefits them, it benefits all of California.

For more in-depth analysis of CSRs and the Covered California market, visit CHCF’s “ACA Repeal Resource Page.”

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