Cost Share Reduction (CSR) – sounds suspiciously like something an economist would say on a Sunday morning news show. But if you are eligible, a CSR can keep money in your pocket. Here’s the low down on how it works:
When you apply for an Advance Premium Tax Credit (APTC or tax credits) you are also applying for a Cost Share Reduction. Not everyone who receives a tax credit will also receive a CSR. Also, not all CSR’s are created equal. But if you receive one, it will reduce the Out of Pocket Costs of a Silver level plan.
So there’s rub number one – it only works with the Silver level plans. If you’ve ever been near a plan finder, you already know Silver plans have higher premiums than Bronze plans (with some exceptions). How does that save you any money?
The honest truth is that if you are healthy and unlikely to use your insurance for anything other than preventative services, it won’t save you anything. Preventative services are covered 100% on all four metal tiers so there’s no advantage to paying more for the same coverage.
For those who do have to use their insurance the picture is very different. Let’s compare two hypothetical plans and see why:
Plan A from ABC Insurance is a Bronze plan. It has a $6500 deductible and a $7150 maximum out of pocket. It has $50 copays for doctor’s office visits and straight copays for medications – $20 for generics, $120 for preferred brands. Your price, after your tax credit, will be $45 / month.
Plan B from XYZ Insurance is a Silver level plan. It normally has a $3000 deductible and a $4500 maximum out of pocket. It has $25 copays for doctor’s office visits and straight copays for medications – $10 for generics, $60 for preferred brands. Your price, after your tax credit, will be $100 / month.
HOWEVER: you have a Cost Share Reduction, so Plan B’s out of pocket costs are LOWER for you than they would be for someone else buying the plan without a CSR. Here’s what your version of Plan B looks like: For you, Plan B has a $300 deductible and a $450 maximum out of pocket. It has $5 copays for doctor’s office visits and straight copays for medications – $0 for generics, $20 for preferred brands. Your price, after your tax credit, will still be $100 / month.
Yes – a $300 deductible instead of $3000 – a very big difference. For someone likely to use their insurance regularly being able to meet the deductible quickly and the Maximum Out of Pocket as well translates into a Big Savings even though they are paying $65 a month more than they would have paid for the Bronze level plan. For someone in treatment or who frequents the ER because they enjoy extreme sports, the Cost Share Reduction can mean a much happier pocketbook.