What is cost-sharing reduction in health insurance?

Cost-sharing reduction refers to a specific type of financial assistance available to eligible individuals and families who enroll in health insurance plans through the Health Insurance Marketplace. This assistance is designed to lower the out-of-pocket expenses that a policyholder might incur, such as deductibles, copayments, and coinsurance.

For individuals and families with a household income between 100% and 250% of the federal poverty level, cost-sharing reductions can significantly reduce the amount of money they need to pay out of pocket when they receive medical services. The intention behind this program is to make healthcare more affordable for those who might struggle to pay full costs, thereby encouraging them to seek necessary medical care without financial hardship.

The other options do not accurately capture the essence of cost-sharing reductions. While premium discounts for low-income individuals can provide financial relief, they are distinct from cost-sharing reductions, which specifically target out-of-pocket costs rather than monthly premiums. An increase in monthly premiums and a plan that covers 100% of medical costs do not align with the goals or mechanisms of cost-sharing reductions, which focus on reducing specific expenses related to healthcare usage.