Cost sharing subsidies and the near poor

By now, I think most people know that the sticker price on Exchange insurance policies is not the price most people will pay for their policy.  Most people know that subsidies are available to lower the out of pocket monthly premium price for the working middle class.  However, there is another class of subsidies that I don’t think a lot of people know about.  These subsidies apply to out of pocket expenses for Exchange Silver plans that transform the Exchange Silver into better plans.

The Center for Budget and Policy Priorities  has a good one paragraph summary of these out of pocket/cost sharing subsidies:

The premium credits allow people to buy a silver plan, which has a 70 percent actuarial value.  That means that the plan will cover 70 percent of the costs for covered medical services of a typical beneficiary population, with beneficiaries, on average, paying the other 30 percent.[3]   However, people who receive cost-sharing assistance — those with incomes below 250 percent of the poverty line — will not have to pay the full remaining 30 percent of the cost of covered services.  As a result, people with incomes below 250 percent of poverty will effectively be enrolled in a plan that has a higher actuarial value than 70 percent.  For example, people with incomes below 150 percent of the poverty line will have plans that have an actuarial value of 94 percent, while plans for people with incomes between 150 percent and 200 percent of the poverty line will have an actuarial value of 87 percent.  These higher actuarial values mean that as a result of cost-sharing assistance, low-income individuals and families will be able to enroll in health plans with lower deductibles, co-payments, and/or total out-of-pocket costs.

It is a sliding scale.  People who barely breaking even get 80% off their out of pocket responsibilities.  For instance, a family on a Silver Plan with a $3000 listed deductible would only be responsible for $600 of the deductible.  I think the family is still on the hook for the $600 instead of transforming the deductible into a sliding scale co-insurance.  A family making just under 250% of federal poverty line would get a 10% discount on their out of pocket expenses.  These subsidies transform a Silver plan for a family making under 150% of FPL into a Platinum plus plan, and for families making between 150% to 200% FPL, their Silver plans get transformed into very good Gold plans to weak Platinums. 

Oh yeah, as a FYI to the Medicare for All folks, Medicare currently has an actuarially value of 82% to 83%.  That number increases with low income subsidies on Medicare Part D but the combination of premium subsidies and out of pocket subsidies gets quite a few people who making less than 250% of FPL coverage that is far better than  Medicare Part A and B combined.

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34 replies
  1. 1
    kc says:

    So how go people get these discounts? Are they given automatically by the providers?

  2. 2
    Just Some Fuckhead, Thought Leader says:

    Is there a reason it has to be this fucking complicated?

  3. 3
    kc says:


    Do, not go.

  4. 4
    kc says:

    @Just Some Fuckhead, Thought Leader:

    No shit; this is ridiculous.

  5. 5
    aimai says:

    Jesus, no wonder no one can figure out what things cost–and no wonder that all our happy stories of “I got a great deal on the exchange” read like a fantasy when someone else, somewhere else, doesn’t get that good of a deal. A) the first person probably doesn’t understand what their deal is or why they got it or how it relates even to other people buying the plan and B) the second person doesn’t know or can’t know how their situation differs from person A.

    This is absolutely set up–or rather its a bug not a feature–to create more hostility, anxiety, and dissatisfaction among people who are actually buying into the exchange and are subsidized by the government since now everyone can experience themselves as suffering because someone else is mooching.

  6. 6
    Jerzy Russian says:

    @Just Some Fuckhead, Thought Leader:

    Is there a reason it has to be this fucking complicated?


  7. 7
    negative 1 says:

    @kc: I kind of disagree, or at least I’ll point this out — Richard is talking in plan design-ese, but the number that matters is actuarial value, i.e. how much of your bill it covers. It’s a pretty easy to explain figure, and I think people would begin to grasp the concept if anyone in the press would cover the ACA other than to say Obamacare scary bad website aaahhhh!!!!!111!1!

  8. 8
    magurakurin says:

    @Jerzy Russian:

    Exactly. The Democrats from Harry Truman on tried to get a national single payer system. They could never make it happen. Obama finally called the Republicans bluff and implemented the reforms they had always suggested to counter the Democrats attempts to get single payer. Truth be told, Republicans do not and never had wanted to do anything. This is the Conservative solution to America’s fucked up health care system. It is not a liberal policy. Don’t get me wrong, the ACA is going to be a huge, huge improvement and I don’t see how anything else could have been achieved. But this is fucked up and complicated because it is the dumb ass way to go about it. But when a country has an enormous amount of dumbasses who vote and hold public office…this is what you get.

  9. 9
    Betty Cracker says:

    Q: How can you tell if an actuary is an introvert or an extrovert?

    A: An extroverted actuary looks at YOUR shoes when he/she is talking to you…


  10. 10
    seabe says:

    Well Medicare-for-All is just an easier thing to implement as it’s already federalized. I’d prefer “Medicaid-for-All” and federalizing it. Or more clinics like Schweitzer set-up, and expand those:

  11. 11
    aimai says:

    I’m pro the ACA and pro the subsidies and think its all going to be fine (ish) and I’m not criticizing the dems for having to go with this rube goldbergesque plan–its worked fine in MA and I don’t actully hear anyone bitching and moaning about the exchanges or the deal they got or didn’t get–one reason is that after people get used to the system they don’t actually compare with their friends and neighbors anymore than they find it easy to talk about their family finances generally. Often people can have and pay for insurance for years without testing the limits, anyway, and at the time that they are overwhelmed with the debts caused by the “30” percent or whatever its too late to be comparing with someone else, or not relevant.

    That being said we have to expect a bumpy ride for the first few years because no one understands what is happening or what they are being charged or its value.

  12. 12
    Just Some Fuckhead, Thought Leader says:

    Everyone in the health insurance field should be lined up against a wall and shot.

  13. 13
    Soonergrunt says:

    @Just Some Fuckhead, Thought Leader: Because Medicare For All was not politically doable. SATSQ.

  14. 14
    Belafon says:

    @Just Some Fuckhead, Thought Leader: That would be how you could get Medicare for all. Some catastrophic event that suddenly eliminates the health insurance companies and all their employees would be about the only thing that would make a medicare for all system workable.

    As for why it’s complicated, it’s because it’s a progressive system. What we had before the ACA is the Republican version: You get what you pay for. Progressive systems are inherently more complicated because they try to be fair in a social sense, which means that there’s a lot more to take into account. See our tax system, with a progressive scale, and then credits for college, children, etc.

  15. 15
    Freemark says:

    When I went on the exchange in my area of Pennsylvania, York County, it said there are no plans with cost sharing. Are there supposed to be some, or is it optional?

  16. 16
    Kay says:

    I think part of the disappointment on the part of (some) Democrats or liberals comes from a perhaps mistaken idea that this would be a big political win.

    If Medicare and Medicaid didn’t strike a death blow to the GOP, and they didn’t, it was always unlikely that the PPACA would be a huge political benefit to the Democrats.

    If it becomes part of the general benefits landscape, and I think it will (eventually) the people who benefit from it are no more likely to support Democrats forever than the people who benefit from Medicare and Medicaid now.

    I think the only place it might move the needle politically is Latinos, because they are so disproportionality uninsured and they aren’t now primarily or overwhelmingly “Democrats”.

    Despite the constant claims and really irrational fears of conservatives, there isn’t a whole lot of political benefit built into programs that primarily benefit low income or lower middle class people. They’re not a wildly influential or powerful group. If they were, if they “punched their weight”, we’d have a much different country than the one we have.

  17. 17

    @kc: Thank you.

    Again: How do these discounts work? Providers ask what that member’s cost is?

    Using a HDHP across 4 specialties has been like a trip to, well, not even Vegas. Reno. It’s just random what the network provider will try to bill.

  18. 18
    MomSense says:

    It seems like a whole lot of people haven’t been paying attention at allto those of us who have been dealing with the individual market for years. It also seems like a lot of people haven’t been paying much attention to their employer provided benefits. I guess I’m glad that people are finally paying attention- but some perspective and patience would be nice.

  19. 19
    Ed in NJ says:

    As an insurance agent, working with Life and Disability plans, I am forced to sit through annual open enrollment meetings throughout much of the 4th quarter. The past two days I sat through six 2.5 hour meetings in which the broker and BC/BS rep went over the various plan designs, including Flex spending and HSA options. Mind numbing. And they have to sit though another 1.5 enrollment session next week!

    Anyone complaining about how complicated the exchange is should be forced to sit in on one of these meetings. It will give you a bit more perspective on what many go through to sign up for insurance.

  20. 20
    Belafon says:

    @magurakurin: We love our myths in this country: The rugged individual, everyone became a success on their own, the North attacked the South, slavery wasn’t that bad…. Until we can get most people over those, and I haven’t figured out how, we’ll never do the things we should. There was that brief period after WW2, when the country was scarred by both the war and the Depression, that we did a lot of the right things, but most people have forgotten.

  21. 21
    Betty Cracker says:

    @Just Some Fuckhead, Thought Leader: You probably cheered when all those innocent plumbers and HVAC techs died when the Death Star exploded. Monster!

  22. 22
    Steeplejack says:

    @Just Some Fuckhead, Thought Leader:

    If they’ve got life insurance that’s going to end up being pretty expensive.

  23. 23
    sparrow says:

    @Belafon: In physics we call it an unstable equilibrium. You can go through hell and hard work to make a more egalitarian, more progressive society, only to have the children born into it become libertarians, unable to see any of the safety nets and help that was there for them from infancy. :(

  24. 24
    Ruckus says:

    I’ve tried to tell people that Medicare is not all that grand. It is far, far better than nothing that is for sure true. But someone on SS and Medicare can still be in financial trouble. Yes you might get some Medicaid assistance but you may not or it may not be enough. That is why there are so many Medicare supplemental policies. Good for the insurance companies, they only cover the 17-18%. And that is at Medicare pricing.

  25. 25
    steve says:


    Yup. This is “needlessly” complicated and silly in the sense that there are simpler systems that are cheaper and more effective. But unfortunately this approach was needed to get any sort of improvement over the previous “system.”

    I hope that in a few years introducing a public option on the exchanges becomes politically feasible/desirable. And then most people (or at least most healthy people) find the public option superior and switch. And then the private insurance companies enter into a death spiral and we end up with de facto single payer. This would take another 20-30 years but short of WWIII-level destruction that will force us to rebuild our insitutions from scratch (I would prefer that not happen), its the only way we are going to get a sensible system.

  26. 26
    Joel says:

    @Kay: Well said.

  27. 27
    Freemark says:

    @Kay: Medicare and SS didn’t destroy the Republican party because they came to embrace, at least on the surface, both medicare and SS. Democrats essentially controlled the Federal gov’t from 1933 to 1980. And, let’s be honest, Democrats lost control in large part because of their embrace of civil rights. Even now Republicans have power because they hide their true feelings toward SS and medicare and have convinced racist old people that Obama is the danger to their entitlements. Stealing them from the old white people who earned them and giving those entitlements to the lazy minorities that didn’t.

    If Republicans keep their hate on for the ACA it will eventually bite them in the ass. The old Republican party knew when to drop back and punt. I don’t think the New and Deteriorated GOP has that capability.

  28. 28
    Kay says:


    The old Republican party knew when to drop back and punt.

    They really didn’t. They still attack Medicare. Bob Dole voted against it and he was their nominee:

    Despite Medicare’s success and the unrealized fears of its detractors, Republican lawmakers are still regurgitating the claim that Medicare would create a “Soviet-style model” of health care. As Rep. Roy Blunt (R-MS), chairman of the GOP Health Solutions Group, explained during a recent radio interview, “you could certainly argue that government should have never have gotten in the health care business…Government did get into the health care business in a big way in 1965 with Medicare, and later with Medicaid, and government already distorts the marketplace.”
    Over the years, Republicans proposed numerous schemes to slash funding or privatize Medicare. Most notably, in 1995, under the leadership of then House Speaker Newt Gingrich (R-GA), Republicans proposed cutting 14% from projected Medicare spending over seven years and forcing millions of elderly recipients into managed health care programs or HMOs. The cuts were to ensure that Medicare is “going to wither on the vine,” Gingrich explained. Similarly, during the 2008 Presidential campaign, Sen. John McCain (R-AZ) proposed cutting $1.3 trillion from Medicare and Medicaid.
    This afternoon on MSNBC, Rep. Mike Pence (R-IN) explained his opposition to a new public health care option by arguing that Medicare spending has exceeded actuarial estimates from 1965.

    Sherrod Brown was out here not too long ago and he said this and he’s right. It’s just the truth.

    Republicans get the benefit of these programs with none of the risk of passing them. They’re the pain in the ass person at work who tells you why nothing you want to try will work, then takes credit for whatever you tried when it succeeds.

    20 years from now my daughter will be commenting on BJ, wondering why people vote for Republicans when they’re covered under Obamacare :)

  29. 29
    MattR says:

    @kc: @PhoenixRising: Reading the Kaiser Foundation explanation, it sounds like the insurance companies have to offer plans with those higher actuarial levels of coverage to people in those income brackets. I am guessing that the government would end up subsidizing the insurance companies since those companies are the ones taking the financial hit. What I am not sure of is how this works for people whose income is right near one of the points that the actuarial percentage changes. Meaning if your earnings estimate is for 149% of the poverty line so you are in a plan with an actuarial value of 94% but then you end up actually earning 151% of the poverty line (which would have qualified you for only 87% AV), do you owe some kind of fee for that extra value you received? Or more importantly, what happens when the case is reversed and you end up making less than you thought so you should have been in a plan with a higher AV? Do you get a refund?

  30. 30
    pseudonymous in nc says:


    there isn’t a whole lot of political benefit built into programs that primarily benefit low income or lower middle class people.

    As I’ve said before, there’s not a huge political payback from “not getting a six-figure automatic bankruptcy medical bill”. That’s why the GOP counterargument is silly, too. Compare that to tax cuts or bang-flash wars, which are the scratch-off tickets of politics.

  31. 31
    Matt McIrvin says:


    If Medicare and Medicaid didn’t strike a death blow to the GOP, and they didn’t, it was always unlikely that the PPACA would be a huge political benefit to the Democrats.

    The problem is that if that’s so, then the next time the Republicans get sufficient control (or enough Democrats get frightened enough to join them), they’ll just overturn it. It will never lock in as a part of US society that it isn’t politically easy to remove. It’ll be more like, say, the Superconducting Super Collider: this huge thing that has to be perpetually renegotiated until one day the negotiations fail and it’s all gone.

  32. 32
    Matt McIrvin says:

    @Matt McIrvin: …I guess the counterargument is that, like Medicare, it could end up becoming sufficiently popular to survive itself without particularly benefiting the party that introduced it.

  33. 33
    Nathanael says:


    I investigated this. The problem comes if your income changes during the year.

    Suppose your income goes down in July. You are required to report your lower income to your insurance company, who is required to shift you into a plan with better “cost sharing reductions”. (Similar change if your income goes up.)

    Sounds great, right? It’s not. Here’s the trap:

    Your deductible and your out-of-pocket limit start over from scratch when you change from one “cost sharing reduction level” to a different “cost sharing reduction level”. So being switched between plans in the middle of the year is a disaster which will cause you to pay far, far more out of pocket.

    I spent roughly 8 hours on the phone with various officials figuring out that this is in fact how it works. Disgusting.

    If your income is variable, you have to stay out of the silver plans. Don’t believe me? Feel free to spend 8 hours on the phone at your state health exchange yourself, checking this out yourself.

  34. 34
    Nathanael says:

    @MattR: The answer to your question is in my previous comment. In short, it’s a trap, and if you’re close to the line, you *must not get a silver plan* because you’ll get hit by the trap.

    To Richard Mayhew: I strongly suggest you investigate this, because you, like so many others, failed to notice the extremely nasty trap which is waiting to be sprung on purchasers of “silver” plans.

    And yes, Medicare for All is better because you don’t get whipsawed between different plans and so there’s no trap.

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