1. Vice President, Health Care Coverage and Access
How Will the Affordable Care Act’s Cost-Sharing Reductions Affect Consumers’ Out of Pocket Costs in 2016?
Sara R. Collins, Ph.D.
Vice President, Health Care Coverage and Access
The Commonwealth Fund
Media Teleconference
March 16, 2016

2. Exhibit 1. The ACA’s Cost-Sharing Reductions and the Study
Health insurers selling plans in the marketplaces are required to increase the cost-protection of silver-level plans for people with low and moderate incomes.
They must offer silver plans with a higher “actuarial value” ; i.e., they increase the average share of medical costs covered by a plan. They must also keep out-of-pocket cost limits below the law’s maximum thresholds, which are lower for low and moderate income people.
Insurers design higher actuarial value plans through a combination of reduced deductibles, out-of- pocket limits and copayments. The U.S. Treasury reimburses plans for these reductions.
To find out how these cost-sharing reductions affect people’s out-of-pocket costs, we pulled information about the second-lowest-cost silver plans in largest markets in 38 states using HealthCare.gov for hypothetical 40 year-old males with low and moderate incomes, and a higher comparison income.
We used the HealthCare.gov out-of-pocket cost comparison tool to get a rough estimate of someone’s out-of-pocket costs for each plan at each income level. We used the tool’s definition of low, medium, and high users of health care services.
In 2016, an estimated 7 million Americans may have plans with these cost-sharing reductions.
In the largest markets in the 38 states using HealthCare.gov , we find that the cost-sharing reductions substantially lower projected out-of-pocket costs for people who qualify for them.
The degree to which the reductions lower estimated spending varies widely by where people live and how much health care they use.
This is primarily because insurers use deductibles, out-of-pocket limits, and copayments in different combinations to lower cost-sharing for eligible enrollees.

3. Exhibit 2. Summary of major findings
In the largest cities in the 38 states using HealthCare.gov , the cost-sharing reductions substantially lower projected out-of-pocket costs for people who qualify for them.
People who use the most health care will see the largest savings.
The degree to which the reductions lower estimated spending varies by health plan and how much health care people use.
This is primarily because insurers use deductibles, out-of-pocket limits, copayments and coinsurance in different combinations to lower cost-sharing for eligible enrollees.
A majority of plans we analyzed exclude at least some services from deductibles (people do not have to meet their deductibles first), but there is wide variation in the number and type of service excluded.

4. Exhibit 3. Cost-sharing reductions lower peoples’ projected out-of-pocket costs, especially for those who use health care the most
Median projected out-of-pocket costs, 40 year old male in second lowest cost silver plan, largest city in states using HealthCare.gov
Annual Income
Notes: HealthCare.gov; second-lowest silver plans for 2016 plans; 40-year old male non-smoker; largest city in state; The analysis includes 36 states that use the HealthCare.gov platform, excluding Alaska and Hawaii for the $17,000 category, and the 38 states that use the Healthcare.gov platform for the $25,000 & $35,000 categories.

5. Level of Health Care Use
Exhibit 4. Projected out-of-pocket costs vary by plan among people with similar health care use
Projected out-of-pocket costs, 40 year old man, $17,000 income in second lowest cost silver plan in largest city in states using HealthCare.gov LA OR TX AR DE KS MO NV NM NC WV FL GA IL MS MT IN PA NJ UT OH MS
Level of Health Care Use
Notes: HealthCare.gov; second-lowest silver plans for 2016 plans; 40-year old male non-smoker; largest city in state; The median includes 36 states that use the HealthCare.gov platform, excluding Alaska and Hawaii for the $17,000 category.

6. Exhibit 5. The cost-sharing reductions lower deductibles and out-of-pocket limits in silver plans
Median deductible and out-of-pocket limits in second lowest cost silver plan in largest city in states using HealthCare.gov
40-year old male, non-smoker, in second-lowest-cost silver plan
Notes: HealthCare.gov; second-lowest silver plans for 2016 plans; 40-year old male non-smoker; largest city in state; The median includes 36 states that use the HealthCare.gov platform, excluding Alaska and Hawaii for the $17,000 category, 37 states that use the Healthcare.gov platform for the $20,000 category; and the 38 states that use the HealthCare.gov platform for the $25,000 & $35,000 categories.

7. Exhibit 6. There is variation in deductibles across markets for second lowest cost silver plans
Highest, median, and lowest in-network deductible amounts in the largest city in states using HealthCare.gov IN WI IN SC WI FL GA IL IO MS NV NC OH OK OR TN TX IN WI HI
NV OR TN TX NJ HI TX TX
Annual Income
Notes: HealthCare.gov; second-lowest silver plans for 2016 plans; 40-year old male non-smoker; largest city in state; The minimum, median, and maximum amounts includes 36 states that use the HealthCare.gov platform, excluding Alaska and Hawaii for the $17,000 category, 37 states that use the Healthcare.gov platform for the $20,000 category; and the 38 states that use the Healthcare.gov platform for the $25,000 & $35,000 categories.

8. Exhibit 7. There is variation in the number and type of services that are excluded from the deductible in the second-lowest-cost silver plan
Number of second-lowest-cost silver plans that exclude services from the deductible, in largest city in states using HealthCare.gov
Health Plan Services
Notes: HealthCare.gov; second-lowest silver plans for 2016 plans with deductibles; 40-year old male non-smoker; largest city in state

9. Second-lowest-cost silver plans for enrollees with incomes of $17,000
Exhibit 8. Different plan designs result in different out-of-pocket costs for low, medium and high health care users
Second-lowest-cost silver plans for enrollees with incomes of $17,000
Virginia Beach, Virginia
Houston, Texas
In-network deductible
$150 $0
Prescription drug deductible
$250
Out-of-Pocket Limit
$600
$2,250
Copays/Coinsurance
Primary Care Visit
$15
Specialist Visit
$30
$10
Generic drugs
$15 Copay after deductible $3
Preferred drugs
50% Coinsurance after deductible $8
ER visit
20% Coinsurance after deductible
$100
Projected Out-of-Pocket Costs 2016
Low user of health care
$72
Medium user of health care
$403
$69
High user of health care
Notes: HealthCare.gov; second-lowest silver plans for 2016 plans; 40-year old male non-smoker with an annual income of $17,000; largest city in state

10. Exhibit 9. Conclusions and Policy Implications
In 2016, as many as 7 million Americans will have marketplace plans with cost-sharing reductions.
These reductions are estimated to significantly lower out-of-pocket costs for enrollees.
People who experience high health care costs will realize particularly large savings.
If the plaintiffs in the House of Representatives vs. Burwell case prevail, families with low and moderate incomes will see their out-of-pocket health care costs climb.
The variation in consumer out-of-pocket spending that we found in the study might be narrowed if health plan designs were more similar.
Seven states currently require some standardization of plans sold in the marketplaces; the federal marketplaces will provide standard plan options for insurers to use in 2017.

11. Appendix 1. Assumed health care service use among 40 year old non-smoking males and females, Healthcare.gov
Low User
Medium User
High User
Male
Female
Doctors visits 1 3 4 7 13 18
Lab or diagnostic tests 6 11
Prescription drugs 2 5 28 32
Days in hospital
Other medical expenses
Minimal
$100
$300
$10,300
$13,800
Source: HealthCare.gov

12. Premium contribution as a share of income
Appendix 2. Cost sharing reductions, out-of-pocket maximums, and premium subsidies, marketplace plans, 2016
FPL
Income
Actuarial value:
Silver plan
Out-of-Pocket Limits
Premium contribution as a share of income
100 - <138%
S: $11,770 - <16,243
F: $24,250 - <33,465
94%
S: $2,250
F: $4,500
2.03%
138% - <150%
S: $16,243 - <17,655
F: $33,465 - <36,375
3.05%-4.07%
150% – <200%
S: $17,655 - <23,540
F: $36,375 - <48,500
87%
4.07%-6.41%
200% – <250%
S: $23,540 - <29,425
F: $48,500 - <60,625
73%
S: $5,450
F: $10,900
6.41%-8.18%
250% – <300%
S: $29,425 - <35,310
F: $60,625 - <72,750
70%
S: $6,850
F: 13,700
8.18%-9.66%
300% – <400%
S: $35,310 - <47,080
F: $72,750 - <97,000
9.66%
400%+
S: $47,080+
F: $97,000+ -
Notes: FPL refers to federal poverty level. Income levels based on 2015 FPL. Actuarial values are the average percent of medical costs covered by a health plan. Premium and cost-sharing credits are for silver plan.
Sources: Rev. Proc ( Final HHS Notice of Benefit and Payment Parameters for 2016 ( 42 U.S.C. §18071(a)(2) (