Congressional Research Service: 'Health Insurance Premium Tax Credit & Cost-Sharing Reductions'
Here are excerpts:
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Summary
Certain individuals without access to subsidized health insurance coverage may be eligible for the premium tax credit (PTC) established under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) and amended under the American Rescue Plan Act of 2021 (ARPA, P.L. 117-2) and the enacted budget reconciliation measure (P.L. 117-169) (commonly referred to as the Inflation Reduction Act) to include several temporary provisions. The dollar amount of the PTC varies from individual to individual, based on a formula specified in statute. Individuals who are eligible for the PTC may be required to contribute some amount toward the purchase of health insurance.
To be eligible to receive the premium tax credit in 2022, individuals must have annual household income at or above 100% of the federal poverty level; not be eligible for certain types of health insurance coverage, with exceptions; file federal income tax returns; and enroll in a plan through an individual exchange. Exchanges (or marketplaces) are not insurance companies; rather, exchanges serve as marketplaces for the purchase of health insurance. They operate in every state and the
The PTC is refundable, so individuals may claim the full credit amount when filing their taxes, even if they have little or no federal income tax liability. The credit also is advanceable, so individuals may choose to receive advanced payments of the credit (or APTC). APTCs are provided on a monthly basis to coincide with the payment of insurance premiums, automatically reducing consumer costs associated with purchasing insurance. The credit is financed through permanent appropriations authorized under the federal tax code.
Individuals who receive premium credit payments also may be eligible for subsidies that reduce cost-sharing expenses. The ACA established two types of cost-sharing reductions (CSRs). One type of subsidy reduces annual cost-sharing limits; the other directly reduces cost-sharing requirements (e.g., lowers a deductible). Individuals who are eligible for CSRs may receive both types. Plans with CSRs were initially provided payments to reimburse them for the cost of providing the subsidies to eligible consumers. Although applicable health plans must continue to provide these CSRs, such plans no longer receive direct payments.
The ARPA made temporary changes to the PTC and to CSRs. The ARPA provision to expand eligibility for and the amount of the PTC applicable to certain exchange plans continues to be in effect. The ARPA temporary changes to the PTC and CSRs that have expired include the provisions that
* suspended the requirement, for tax year 2020, that individuals pay back PTC amounts that were provided in excess and
* expanded eligibility for and the calculation of both the PTC and CSRs for individuals who receive unemployment compensation during calendar year 2021.
The budget reconciliation measure, enacted on
The
This report describes current law and applicable regulations and guidance, specifically with regard to how the PTC and CSR requirements apply in 2022.
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Contents
Background ... 1
Premium Tax Credit ... 2
Eligibility ... 2
File Federal Income Tax Returns ... 3
Enroll in a Plan Through an Individual Exchange ... 3
Have Annual Household Income at or Above 100% of the Federal Poverty Level ... 4
Not Eligible for Minimum Essential Coverage ... 5
Determination of Required Premium Contributions and Premium Tax Credit Amounts ... 6
Required Premium Contribution Examples ... 6
Reconciliation of Advance Premium Tax Credit Payments ... 8
Preliminary Tax Credit Data ... 8
Tax Year 2019 ... 9
Enrollment Data ... 9
Cost-Sharing Reductions ... 10
Reduction in Annual Cost-Sharing Limits ... 11
Reduction in Cost-Sharing Requirements ... 12
Figures
Figure 1. Cap on Required Premium Contributions for Individuals Who Are Eligible for the Premium Tax Credit in 2022 ... 7
Tables
Table 1. Income Levels Applicable to Eligibility for the Premium Tax Credit for 2022, by Selected Family Sizes ... 4
Table 2. Annual Limits on Repayment of Excess Premium Tax Credit Payments, 2022 ... 8
Table 3. ACA Cost-Sharing Reductions: Reduced Annual Cost-Sharing Limits, 2022 ... 12
Table 4. ACA Cost-Sharing Reductions: Increased Actuarial Values ... 12
Contacts
Author Information ... 13
Acknowledgments ... 13
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Background
Certain individuals and families without access to subsidized health insurance coverage may be eligible for a premium tax credit (PTC). This credit, authorized under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) and amended under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) and the enacted budget reconciliation measure (P.L. 117169) (commonly referred to as the Inflation Reduction Act), applies toward the cost of purchasing specific types of health plans offered by private health insurance companies./1
Individuals who receive PTC payments also may be eligible for subsidies that reduce cost-sharing expenses./2
To be eligible for the PTC and cost-sharing reductions (CSRs), individuals and families must enroll in health plans offered through health insurance exchanges and meet other criteria. Exchanges operate in every state and the
Exchanges are not insurance companies; rather, they are marketplaces that offer private health plans to qualified individuals and small businesses. The ACA specifically requires exchanges to offer insurance options to individuals and to small businesses, so exchanges are structured to assist these two different types of customers. Consequently, each state has one exchange to serve individuals and families (an individual exchange) and another to serve small businesses (a Small Business Health Options Program, or SHOP, exchange).
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1 Sec.1401 of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended); new Sec.36B of the Internal Revenue Code of 1986 (IRC); Sec.Sec.9661-9663 of the American Rescue Plan Act of 2021 (ARPA, P.L. 117-2); and Sec.12001 of the enacted budget reconciliation measure (P.L. 117-169).
2 ACA Sec.1402; and new Sec.18071 of the Public Health Service Act (PHSA).
3 The ACA also gave the territories the option of establishing exchanges, but none elected to do so by the statutory deadline of
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Temporary Amendments to the Premium Tax Credit
The American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) made temporary changes to the premium tax credit (PTC) and cost-sharing reductions (CSRs). Of those temporary changes, one pertains to tax year 2022: the provision to expand eligibility for and the amount of the PTC applicable to certain exchange plans.
The ARPA temporary changes to the PTC and CSRs that have expired include the provisions that
* suspended the requirement, for tax year 2020, that individuals pay back PTC amounts that were provided in excess and
* expanded eligibility for and the calculation of both the PTC and CSRs for individuals who receive unemployment compensation during calendar year 2021.
The budget reconciliation measure enacted on
This report describes current law and applicable regulations and guidance, specifically how the PTC and CSR requirements apply in 2022, and includes historical enrollment and spending data.
Sources: 26 U.S.C. Sec.36B(b)(3)(A)(iii) and (c)(1)(E); and CRS Report R46777, American Rescue Plan Act of 2021 (P.L. 117-2):
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Health insurance companies that participate in the individual and SHOP exchanges must comply with numerous federal and state requirements. Among such requirements are restrictions related to the determination of premiums for exchange plans (rating restrictions). Insurance companies are prohibited from using health factors in determining premiums. However, they are allowed to vary premiums by age (within specified limits), geography, number of individuals enrolling in a plan, and smoking status (within specified limits)./4
Premium Tax Credit
The dollar amount of the PTC is based on a statutory formula and varies from individual to individual. Individuals who are eligible for the premium credit generally are required to contribute some amount toward the purchase of their health insurance.
The PTC is refundable, so individuals may claim the full credit amount when filing their taxes even if they have little or no federal income tax liability. The credit also is advanceable, so individuals may choose to receive the credit in advance of filing taxes on a monthly basis to coincide with the payment of insurance premiums (technically, advance payments go directly to insurers). Advance payments (or APTC) automatically reduce monthly premiums by the credit amount. Therefore, the direct cost of insurance to an individual or family that is receiving APTC payments generally will be lower than the advertised cost for a given exchange plan.
Eligibility
To be eligible to receive the PTC, individuals must meet the following criteria:
* file federal income tax returns;
* enroll in a plan through an individual exchange;
* have annual household income at or above 100% of the federal poverty level (FPL)/5 for tax year 2022;/6 and
* not be eligible for minimum essential coverage (see the "Not Eligible for Minimum Essential Coverage" section in this report), with exceptions.
These eligibility criteria are discussed in greater detail below.
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4 For additional discussion regarding these rating restrictions, see CRS Report R45146, Federal Requirements on Private Health Insurance Plans.
5 Household income is measured according to the definition for modified adjusted gross income (MAGI); see the "Have Annual Household Income at or Above 100% of the Federal Poverty Level" section of this report. The guidelines that designate the federal poverty level (FPL) are used in various federal programs for eligibility purposes.
The poverty guidelines vary by family size and by whether the individual resides in the 48 contiguous states and the
6 ARPA Sec.9661 expands eligibility for the premium tax credit (PTC) by temporarily eliminating the phaseout for households with annual incomes above 400% of FPL. Elimination of the phaseout applies to tax years 2021 and 2022 under ARPA. Sec.12001 of the enacted budget reconciliation measure (P.L. 117-169) extends the
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File Federal Income Tax Returns
Because premium assistance is provided in the form of a tax credit, such assistance is administered by the
Married couples are required to file joint tax returns to claim the premium credit, with some exceptions. The calculation and allocation of credit amounts may differ in the event of a change in tax-filing status during a given year (e.g., individuals who marry or divorce)./7
Enroll in a Plan Through an Individual Exchange The PTC is available only through individual exchanges; the credit is not available through SHOP exchanges. Individuals may enroll in exchange plans if they (1) reside in a state in which an exchange was established; (2) are not incarcerated, except individuals in custody pending the disposition of charges; and (3) are citizens or have other lawful status.
Undocumented individuals (individuals without proper documentation for legal residence) are prohibited from purchasing coverage through an exchange, even if they could pay the entire premium. Because the ACA prohibits undocumented individuals from obtaining exchange coverage, these individuals are not eligible for the PTC. Although certain individuals are not eligible to enroll in exchanges due to incarceration or legal status, their family members may still receive the PTC as long as those family members meet all eligibility criteria.
Generally, enrollment through individual exchanges is restricted to a certain time period: an open enrollment period (OEP). The OEP for exchanges occurs near the end of a given calendar year for enrollment in health plans that begin the following year. Under certain circumstances, individuals may enroll in exchange plans outside of the OEP during a special enrollment period (SEP)./8
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7
8 For individuals who experience a "triggering event" during the plan year, exchanges are required to provide an SEP to allow such individuals the option of enrolling into an exchange for that plan year. SEP rules are specified at 45 C.F.R.
155.420, at https://www.govinfo.gov/content/pkg/CFR-2013-title45-vol1/xml/CFR-2013-title45-vol1-sec155-420.xml.
In addition, "because
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Actuarial Value and Metal Plans
Most health plans sold through exchanges established under the ACA are required to meet actuarial value (AV) standards, among other requirements. AV is a summary measure of a plan's generosity, expressed as the percentage of medical expenses estimated to be paid by the insurer for a standard population and set of allowed charges. In other words, the higher the percentage, the lower the cost sharing, on average, for the population. AV is not a measure of plan generosity for an enrolled individual or family, nor is it a measure of premiums or benefits packages.
An exchange plan that is subject to the AV standards is given a precious metal designation: platinum (AV of 90%), gold (80%), silver (70%), or bronze (60%).
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Have Annual Household Income at or Above 100% of the Federal Poverty Level
Individuals generally must have household income (based on FPL) that meets a minimum level to be eligible for the PTC in 2022, as specified under the ARPA./9
Household income is measured according to the definition for modified adjusted gross income (MAGI)./10
An individual whose MAGI is at or above 100% of FPL may be eligible to receive the PTC for tax year 2022./11
Table 1 displays the income levels equivalent to 100% of FPL, for the location and size of family, that correspond to the eligibility criteria for the PTC in 2022 (using poverty guidelines updated by the
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Table 1. Income Levels Applicable to Eligibility for the Premium Tax Credit for 2022, by Selected Family Sizes
Source:
Notes: For 2022, the income levels used to calculate premium credit eligibility and amounts are based on 2021 HHS poverty guidelines. The poverty guidelines are updated annually for inflation. FPL = Federal Poverty Level. DC =
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9 There are exceptions to the lower bound income threshold at 100% of FPL. One exception relates to the state option under the ACA to expand Medicaid for individuals with income up to 138% of FPL. If a state chooses to undertake the ACA Medicaid expansion (or has already expanded Medicaid above 100% of FPL), eligibility for the premium tax credit would begin above the income level at which Medicaid eligibility ends in such a state. (Note that in states that do not expand Medicaid to at least 100% of FPL, some low-income residents in those states are ineligible for both the credit and Medicaid.) Another exception is for lawfully present aliens with incomes below 100% of FPL, who are not eligible for Medicaid for the first five years that they are lawfully present. The ACA established Sec.36B(c)(1)(B) of the IRC to allow such lawfully present aliens to be eligible for the credit. Lastly, the final rule on the premium tax credit provided a special rule for credit recipients whose incomes at the end of a given tax year end up being less than 100% of FPL. Such individuals will continue to be considered eligible for the PTC for that tax year.
10 See CRS Report R43861, The Use of Modified Adjusted Gross Income (MAGI) in Federal Health Programs, for background information about the use of MAGI in determining eligibility for the premium tax credit.
11 ARPA Sec.9661 expands eligibility for the PTC by temporarily eliminating the phaseout for households with annual incomes above 400% of FPL. Elimination of the phaseout applies to tax years 2021 and 2022 under ARPA. Sec.12001 the enacted budget reconciliation measure (P.L. 117-169) extends the
12 The poverty guidelines are updated annually, at the beginning of the year. However, premium credit calculations are based on the prior year's guidelines to provide individuals with timely information as they compare and enroll in exchange plans during the OEP (which occurs prior to the beginning of the plan year).
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Not Eligible for Minimum Essential Coverage
To be eligible for a premium credit, an individual may not be eligible for minimum essential coverage (MEC), with exceptions (described below). The ACA broadly defines MEC to include Medicare Part A; Medicare Advantage; Medicaid (with exceptions); the State Children's Health Insurance Program (CHIP); Tricare; Tricare for Life, a health care program administered by the
However, the ACA provides certain exceptions regarding eligibility for MEC and PTC. An individual may be eligible for the credit even if he or she is eligible for any of the following sources of MEC:
* the individual (nongroup) health insurance market;/14
* an employer-sponsored health plan that is either unaffordable/15 or inadequate;/16 or
* limited benefits under the Medicaid program./17
With respect to the exception provided when employer-sponsored plans are unaffordable or inadequate, the
Under the rule, the eligibility determination process will consider family premiums and cost-sharing requirements of employer plans to test for affordability and adequacy of such plans to family members. Prior to the rule, the determination of family eligibility considered costs to the employee only even if the family was seeking coverage (this is referred to colloquially as the "family glitch"). The previous exclusion of family costs in the eligibility determination process resulted in some family members being ineligible for the PTC even when employer coverage is unaffordable to them, because the employee-only cost is determined to be affordable. The previous test of adequacy of family coverage likewise excluded family costs.
Given the changes to determining family eligibility (the employee-only eligibility determination process will not change), the rule is expected to expand the total number of individuals who will qualify for federal subsidies./19
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13 See CRS Report R44438, The Individual Mandate for Health Insurance Coverage: In Brief.
14 The private health insurance market continues to exist outside of the ACA exchanges. Moreover, almost all exchange plans may be offered in the market outside of exchanges.
15 For 2022, if the employee's premium contribution toward the employer's self-only plan exceeds 9.61% of household income, such a plan is considered unaffordable for premium credit eligibility purposes. For additional information, see
16 If a plan's actuarial value is less than 60%, the plan is considered inadequate for premium credit eligibility purposes.
17 Limited benefits under Medicaid include the pregnancy-related benefits package, treatment of emergency medical conditions only, and other limited benefits.
18 87
19 For additional discussion about the final rule, see
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Medicaid Expansion
Under the ACA, states have the option to expand Medicaid eligibility to include all nonelderly, nonpregnant individuals with incomes up to 138% of FPL./20 If an individual who applied for the premium credit through an exchange is determined to be eligible for Medicaid, the exchange must have that individual enrolled in Medicaid instead of an exchange plan. Therefore, in states that implemented the optional Medicaid expansion to include individuals with incomes at or above 100% of FPL (or any state that decided to expand eligibility to individuals irrespective of the ACA's Medicaid expansion provisions), premium credit eligibility begins at the income level at which Medicaid eligibility ends.
Determination of Required Premium Contributions and Premium Tax Credit Amounts
Required Premium Contribution Examples
The amount of the PTC varies from individual to individual. Calculation of the credit is based on the annual household income (i.e., MAGI) of the individual (and tax dependents), the premium for the exchange plan in which the individual (and any dependents) is enrolled, and other factors.
For simplicity's sake, the following formula illustrates the calculation of the credit: Benchmark Plan Premium - Required Premium Contribution = Premium Tax Credit Amount Premiums are allowed to vary based on a few characteristics of the person (or family) seeking health insurance. For purposes of this report, Benchmark Plan premium refers to the premium for the second-lowest-cost silver plan (see text box in the "Eligibility" section of this report) in the person's (or family's) local area. Required Premium Contribution refers to the amount that a premium credit-eligible individual (or family) may pay toward the exchange premium. The required premium contribution is capped according to household income, with such income measured relative to FPL (see Table 1). As household income increases, the share of income used to determine the required premium contribution also generally increases. The required premium contribution caps typically are updated through
The amount of the credit for a given individual is calculated as the difference between the premium of the plan in which the individual enrolls and the required contribution. Given that the premium and required contribution vary from person to person, the premium credit amount likewise varies. An extreme example is when the premium for the benchmark plan is very low, the tax credit may cover the entire premium and the individual may pay nothing toward the premium. The opposite extreme scenario, for some higher-income individuals, is when the required contribution exceeds the premium amount, leading to a credit of zero dollars, meaning the PTC-eligible individual (or family) would pay the entire premium amount.
In 2022, eligible households with annual incomes between 100% and 150% of FPL receive full premium subsidies (toward benchmark plans); eligible individuals with higher incomes may receive partial subsidies for such plans. For all eligible households with annual incomes at or above 400% of FPL, each such household would be required to spend up to 8.5% of their income (prorated monthly) before receiving any credit. For some higher-income households, this results in receiving no credit despite being eligible. Beginning in 2026, the percentages of income used in the credit formula will revert back to the annual adjustment process established under the ACA.
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Figure 1. Cap on Required Premium Contributions for Individuals Who Are Eligible for the Premium Tax Credit in 2022
Source:
Notes: The cap assumes that the individual enrolls in the benchmark plan (second-lowest-cost silver plan) used to calculate premium credit amounts. If the individual enrolls in an exchange plan that is more expensive than the benchmark plan, the individual would be responsible for paying any premium amount that exceeds the calculated credit amount. Section 9661 of the American Rescue Plan Act of 2021 (ARPA, P.L. 117-2) applies these percentages to tax years 2021 and 2022. Sec.12001 of the enacted budget reconciliation measure (P.L. 117-169) extends the
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To illustrate the premium credit calculation for 2022, consider a premium credit eligible individual living in
A similar calculation is used to determine the required premium contribution for a family. For instance, consider a couple and one child residing in
Generally, the arithmetic difference between the premium and the individual's (or family's) required contribution is the tax credit amount provided to the individual (or family). Therefore, factors that affect either the premium or the required contribution (or both) will change the premium credit amount; such factors include age, family size, geographic location, and choice of metal plan.
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20 See CRS In Focus IF10399, Overview of the ACA Medicaid Expansion.
21 See
Beginning in tax year 2026, the annual update to these percentages would revert to pre-ARPA statute and applicable
22 For estimates of premium credit amounts based on factors for which insurance companies are allowed to vary premiums (as described in the "Background" section of this report), see
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Reconciliation of Advance Premium Tax Credit Payments
As mentioned previously, an eligible individual (or family) may receive advance payments of the premium credit to coincide with when insurance premiums are due. For such an individual, the advance premium tax credit (APTC) is provided on a monthly basis and the amount is calculated using an estimate of income. When an individual files his or her tax return for a given year, the total amount of APTC he or she received in that tax year is reconciled with the amount he or she should have received, based on actual income, as determined on the tax return.
If an individual's income decreased during the year and he or she should have received a larger tax credit, the additional credit amount will be included in the individual's tax refund for the year or used to reduce the amount of taxes owed. If an individual's income increased during the year and he or she received too much in APTC payments, the excess amount generally will be repaid in the form of a tax payment.
For individuals with incomes below 400% of FPL, any repayment amount is capped with greater tax relief provided to individuals with lower incomes (see Table 2).
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Table 2. Annual Limits on Repayment of Excess Premium Tax Credit Payments, 2022
Source:
Notes: The applicable dollar limit for all other tax filers is twice the limit for unmarried individuals.
a. Does not include surviving spouses or heads of households.
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Preliminary Tax Credit Data
The
Tax Year 2019
For tax year 2019, around 5.8 million tax returns indicated receipt of advance payments of the tax credit, totaling to more than
The SOI data indicate that approximately 5.2 million tax returns for the 2019 tax year claimed a total of more than
Enrollment Data
HHS regularly publishes data on persons selecting and enrolling in exchange plans, including individuals who were determined eligible for the PTC. For plan year 2021, HHS posted reports and public-use files available with national enrollment data, as well as limited data by state, county, and zip code./29 During the 2021 open enrollment period (OEP), approximately 88% of all exchange enrollees were eligible for the tax credit./30 In addition to the annual OEP, the Administration provided a special enrollment period (SEP) in response to the ongoing public health emergency caused by the Coronavirus Disease 2019 (COVID-19) pandemic./31 During the 2021 SEP, approximately 91% of "consumers with New SEP Plan Selections" were eligible for the PTC./32
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23 The data represent tax return information at the time of filing; therefore, the data do not incorporate corrections or amendments made to the tax returns at a later time.
24 The SOI report does not include all estimates of tax credit recipients and claimants necessary to fully describe the overlap of these two taxpayer populations.
25 The 3 million taxpayers who received excess advanced payments paid back a total of approximately
26 The number of taxpayers who received advance payments exceeded the number who were eligible for the credit, indicating that some taxpayers received unauthorized subsidies. The
27 The
28
29 CMS, "2021 Marketplace Open Enrollment Period Public Use Files," at https://www.cms.gov/research-statisticsdata-systems/marketplace-products/2021-marketplace-open-enrollment-period-public-use-files.
30 See CMS, "Health Insurance Marketplaces 2021 Open Enrollment Report," at https://www.cms.gov/files/document/health-insurance-exchanges-2021-open-enrollment-report-final.pdf.
31 This SEP was available in all states using the HealthCare.gov enrollment platform from
32 This is the share of "unique consumers who didn't have an active enrollment" at the time the SEP began in their respective states, and "made a plan selection" during the SEP, which became "active" (i.e., was not cancelled), as specified. CMS, 2021 Final Marketplace Special Enrollment Period Report, at https://www.hhs.gov/sites/default/files/ 2021-sep-final-enrollment-report.pdf. Also see this report for more information about SBEs' SEPs.
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Cost-Sharing Reductions
An individual who qualifies for the PTC, is enrolled in a silver plan (see text box above, "Actuarial Value and Metal Plans"), and has annual household income no greater than 250% of FPL is eligible for cost-sharing reductions (CSRs)./33 The purpose of CSRs is to reduce an individual's (or family's) expenses related to cost-sharing requirements under the silver plan; such requirements may include deductibles, co-payments, coinsurance, and annual cost-sharing limits./34 There are two types of CSRs, and the level of assistance for each varies by income band (see descriptions below). Individuals who are eligible for cost-sharing assistance may receive both types of subsidies, as long as they meet the applicable eligibility requirements./35 The ACA requires the HHS Secretary to provide full reimbursements to insurers that provide CSRs. Federal outlays for such reimbursements totaled the following amounts:/36
* FY2014:
* FY2015:
* FY2016:
* FY2017:
Although the ACA authorized the cost-sharing subsidies and payments to reimburse insurers, it did not address the financing for such payments.
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33 ACA Sec.1402.
34 A deductible is the amount an insured consumer pays for covered health care services before the applicable insurer begins to pay for such services (with exceptions). Coinsurance is a share of costs, expressed as a percentage, an insured consumer pays for a covered health service. A co-payment is a fixed dollar amount an insured consumer pays for a covered health service. An annual cost-sharing limit is the total dollar amount an insured consumer would be required to pay out of pocket for use of covered services in a plan year. Once an insured consumer's out-of-pocket spending meets this limit, the insurer generally will pay 100% of covered costs for the remainder of the plan year.
35 In addition to CSRs, the ACA provides special cost-sharing assistance to
36 Data provided to CRS by the
37 For a discussion of legal considerations related to the termination of CSR payments, see CRS Legal Sidebar LSB10018,
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Despite the administrative decision to terminate CSR payments, such decision provides no relief to insurers that continue to be required under federal law to provide CSRs to eligible individuals. In response, health insurers increased premiums to offset this loss in reimbursements (if permitted by state insurance regulators); this practice is referred colloquially as silver loading./38
As part of the legal challenges related to CSR payments, the
Reduction in Annual Cost-Sharing Limits
Each metal plan limits the total dollar amount an insured consumer will be required to pay out of pocket for use of covered services in a plan year (referred to as an annual cost-sharing limit in this report). In other words, the amount an individual spends in a given year on health care services covered under his or her plan is capped./40 For 2022, the annual cost-sharing limit for self-only coverage is
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38 For background on silver loading, see
39
40 The annual cost-sharing limit applies only to health services that are covered under the health plan and are received within the provider network, if applicable.
41 See "
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Table 3. ACA Cost-Sharing Reductions: Reduced Annual Cost-Sharing Limits, 2022
Source:
Note: ACA = Patient Protection and Affordable Care Act (P.L. 111-148, as amended).
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For example, consider the hypothetical individual who resides in
Therefore, by reducing the annual cost-sharing limit, eligible individuals are required to spend less before benefitting from this financial assistance.
Reduction in Cost-Sharing Requirements
The second type of CSR also applies to premium credit recipients with incomes up to and including 250% of FPL. For eligible individuals, the cost-sharing requirements (for the plans in which they have enrolled) are reduced to ensure that the plans cover a certain percentage of allowed health care expenses, on average. The practical effect of this CSR is to increase the actuarial value (AV) of the exchange plan in which the person is enrolled (Table 4). In other words, enrollees face lower cost-sharing requirements than they would have without this assistance. Given that this type of CSR directly affects cost-sharing requirements (e.g., lowers a co-payment), both enrollees who use minimal health care and those who use a great deal of services may benefit from this assistance.
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Table 4. ACA Cost-Sharing Reductions: Increased Actuarial Values
Source: 45 C.F.R. Sec.156.420.
Note: ACA = Patient Protection and Affordable Care Act (P.L. 111-148, as amended).
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To be eligible for cost-sharing subsidies, an individual must be enrolled in a silver plan, which already has an AV of 70% (see text box above, "Actuarial Value and Metal Plans"). For an individual who receives the CSR referred to in Table 4, the health plan will impose different cost-sharing requirements so that the silver plan will meet the applicable increased AV. The ACA does not specify how a plan should reduce cost-sharing requirements to increase the AV from 70% to one of the higher AVs. Through regulations, HHS requires each insurance company that offers a plan subject to this CSR to develop variations of its silver plan; these silver plan variations must comply with the higher levels of actuarial value (73%, 87%, and 94%)./42 When an individual is determined by an exchange to be eligible for CSRs, the person is enrolled in the silver plan variation that corresponds with his or her income.
Consider the same hypothetical individual discussed in the previous section. Since this person's income is at 150% of FPL, if he or she receives this type of subsidy, the silver plan in which he or she is enrolled will have an AV of 94% (as indicated in Table 4), instead of the usual 70% AV for silver plans.
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42 See 45 C.F.R. Sec.156.420.
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The report is posted at: https://crsreports.congress.gov/product/pdf/R/R44425
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