The Patient Protection and Affordable Care Act's
premium subsidies for buying exchange coverage have drawn huge attention this week following conflicting appellate court rulings
about their legality. But far less is known about the law's related provision for helping lower-income Americans afford their deductibles and other cost-sharing burdens.
The law's cost-sharing reductions are important because many health plans on the exchange market feature relatively high deductibles, coinsurance, and copays. That's a big concern for hospitals and other providers in terms of collecting medical bills. There are reports that some physicians are spurning exchange plan enrollees
because they fear they will have trouble collecting bills given the high cost-sharing burden in these plans.
HHS has not issued data on how many people have qualified for the cost-sharing subsidies, leaving many industry stakeholders as well as consumers in the dark as to their availability, qualifying criteria and benefits. In contrast, the feds have reported that premium tax credits cover 76%
, on average, of qualifying households' monthly premium.
The CMS said currently there is no specific breakdown of exchange enrollees who receive cost-sharing reductions, though the agency said it is “always looking to provide more information when we can and are confident in the accuracy of the figures.” Researchers say there are limited study data on how many people are receiving subsidies and how much assistance they're getting.
The two forms of subsidies are separate but both help make health plans on the Obamacare exchanges more affordable, said David Cusano, senior research fellow at the Georgetown Health Policy Institute. Premium tax credits reduce the monthly premiums, while cost-sharing subsidies lower the amount enrollees have to pay for deductibles, copays and coinsurance. “Cost-sharing reductions really get at that second bucket—the reduction of out-of-pocket expenses,” Cusano said.
Several conditions apply to the cost-sharing subsidies. First, enrollees must be enrolled in a silver-tier plan—one of the most common exchange plans in which insurers cover 70% of benefit costs, and enrollees pay 30%. Cost-sharing reductions then automatically apply to those who earn between 100% and 250% of the federal poverty level. Individuals who make $11,670-$29,175 annually and families of four who make $23,850-$59,625 fall in that range.
For the poorest, or those within 100% and 150% of poverty, they only have to pay 6% out of pocket for healthcare services thanks to cost-sharing subsidies, compared to the standard 30%. Those who fall between 150% and 200% pay 13% of out-of-pocket expenses, while those between 200% and 250% receive the smallest discount, still having to pay 27%. Insurers have flexibility in how they reduce those costs
—lower copays, reduced deductibles, etc.—and there are also some exceptions for drugs.
Cost-sharing subsidies, which are paid directly to health insurers
from the government, also limit how much consumers have to pay out of pocket per year. For example, people between 100% and 200% of poverty have an out-of-pocket spending limit two-thirds lower than those who have a silver plan and no cost-sharing reductions. For 2014, the maximum out-of-pocket cap for those enrollees is $2,250.
For at least one health plan, a sizable number of exchange-based members are receiving the cost-sharing subsidies.
CoOportunity Health, a new consumer-governed plan created through the ACA and operating in Iowa and Nebraska, has about 50,000 members with exchange plans. Of those 50,000, 90% were eligible for premium tax credits, and of that subset, 60% were eligible for cost-sharing subsidies. “We were surprised that so many were eligible for the advanced subsidies through the cost-sharing reduction program,” said Cliff Gold, the plan's COO.
CoOportunity Health's cost-sharing figures appear to be consistent with what some individual states have reported thus far, two experts say, according to Caroline Pearson, vice president at consulting firm Avalere Health, and Katherine Hempstead, healthcare director at the Robert Wood Johnson Foundation. In Washington state (PDF)
, for example, more than 70% of silver-tier plan members qualified for cost-sharing reductions. About three-quarters of exchange enrollees from New York (PDF)
received those reductions.
The cost-sharing subsidy “is significant, and it does dramatically reduce the out-of-pocket liability for those patients,” Pearson said.
Cost-sharing aside, many low-income exchange plan members still face high out-of-pocket expenses as a percentage of their income. These exchange plan members have worried some providers, especially physicians, who believe collecting payments will become increasingly more difficult. The Miami Herald
recently reported that some South Florida physicians have refused to see exchange patients at least partly due to the high out-of-pocket costs associated with their plans.
“Physician offices were responsible just for copays,” Pearson said. “Now you've got large deductibles and high use of coinsurance. That means more patients who can't pay out of pocket at a physician office.”
Further complicating the situation for providers is simply knowing whether patients qualify for cost-sharing subsidies. “What I don't know, and I think that everybody's figuring out is how a provider finds out that person who's calling them to make an appointment has this cost-sharing reduction,” Hempstead said. “That's a murky area to me.”
Despite the challenges, cost-sharing subsidies still offer a huge advantage to hospitals and physicians, Pearson said. Even if providers are unsure of how much they'll be collecting from exchange patients, it's more favorable than the pre-ACA option of treating the uninsured and possibly receiving no payment at all. “If you think about (cost-sharing subsidies) compared to people who have no insurance and have no limit, it does provide some meaningful protection for providers,” she said. “It puts a very firm per-person limit on a provider's uncompensated care.”
CoOportunity Health's Gold said it's important for providers not to stereotype and turn away exchange plan members. Most have lower incomes, but that doesn't mean accepting these patients will automatically result in bad debt. “It is a mistake to lump everybody buying into the exchanges as one homogenous group because people who are in the most advanced subsidy levels actually have the lowest out-of-pocket payments,” he said.
A new CNN/ORC International poll (PDF)
found 53% of Americans believe their family or other families are better off thanks to the Affordable Care Act. The percentage is higher for minorities, 72% of whom think the healthcare law has helped them or others. The results are near identical to last September's poll. However, more people said in the new poll that the ACA has not benefited anyone (44%) compared with in September (37%). The poll, conducted last weekend and released Wednesday, interviewed 1,012 adults.Follow Bob Herman on Twitter: @MHbherman