Cost-sharing subsidies, officially known as cost-sharing reductions or CSR, are a provision in the Affordable Care Act that reduces out-of-pocket medical costs (ie, deductibles, coinsurance, copays) for eligible enrollees who select silver plans in the exchange.
Cost-sharing subsidies are automatically incorporated into silver plans when the enrollee has a household income of no more than 250 percent of the federal poverty level (for reference, here’s what that translates to in terms of dollar amounts for 2021 coverage, which is based on the 2020 poverty level numbers).
Cost-sharing subsidies do not apply to plans at any other metal level (unlike premium subsidies, which can be used for plans at all metal levels). Also unlike premium subsidies, the cost-sharing subsidies are not a tax credit and do not need to be reconciled when the insureds file their taxes.
The federal government used to directly reimburse health insurance companies for the cost of cost-sharing subsidies. That ended in the fall of 2017, but cost-sharing subsidies have continued to be available to eligible enrollees. To cover the cost, most insurers simply add the cost of cost-sharing subsidies to silver plan premiums. This approach, known as “silver loading,” results in larger premium subsidies for everyone in the area, as premium subsidy amounts are based on the cost of the second-lowest-priced silver plan in each area. Here’s more information about everything that happened with cost-sharing subsidies in late 2017 and since then.
Read more about cost-sharing subsidies.