cost sharing

What is cost-sharing?

Cost-sharing refers to the patient’s portion of costs for healthcare services covered by their health insurance plan. The patient is responsible for paying cost-sharing amounts out-of-pocket.

Cost-sharing can be in the form of a deductible, copayment, or coinsurance; most plans incorporate all of these types of cost-sharing, with the specifics depending on the service that’s provided and whether or not the patient has met their deductible (coinsurance generally applies after you’ve met the deductible, whereas you’ll be paying towards your deductible before that point; copays generally apply to other services, such as office visits or prescription drugs, if they aren’t counted towards the deductible). Some health plans, like HDHPs, don’t have copays and instead just have a deductible or a deductible plus coinsurance. The specifics will vary from one plan to another.

Are premiums part of cost-sharing?

Cost-sharing comes into play when a policyholder actually uses medical and/or prescription drug insurance coverage. Health insurance premiums – the monthly payments you must make to keep your coverage in force, regardless of whether or not you use a healthcare service – are not considered cost-sharing amounts. Premiums are not part of your out-of-pocket exposure under Medicare or a commercial plan obtained through an employer or in the individual/family market via the Affordable Care Act’s health insurance marketplace.

However, premiums are counted as part of the allowable out-of-pocket costs under Medicaid and the Children’s Health Insurance Program (CHIP), which are capped at 5% of enrollees’ household income. So for Medicaid and CHIP, premiums and cost-sharing are both counted as out-of-pocket costs. But under private health insurance or Medicare, “out-of-pocket costs” generally only refer to cost-sharing incurred when a person has medical claims (even though premiums are also paid out-of-pocket).

Is there a cap on the total amount of cost-sharing I'm required to pay?

Under the Affordable Care Act, most plans must have an out-of-pocket maximum (referred to as maximum OOP, or MOOP) of no more than $9,100 in cost-sharing for a single individual in 2023 (this limit is indexed each year). Many plans have out-of-pocket limits below this level, but they cannot be higher. Once your cost-sharing amounts have reached your plan’s maximum out-of-pocket limit for the year, the health insurance plan will pay 100% of your remaining covered costs that year.

The ACA’s limits on out-of-pocket costs only applies to in-network services that fall within the umbrella of essential health benefits. And it does not apply to grandmothered or grandfathered plans, or to plans that aren’t regulated by the ACA at all, such as short-term health insurance.

Original Medicare does not have a cap on cost-sharing amounts, although most enrollees have supplemental coverage (from an employer, Medicaid, or a Medigap plan) that covers some or all of their cost-sharing expenses. Medicare Advantage plans cannot require members to pay cost-sharing in excess of $8,300 in 2023, although many plans have cost-sharing limits below this (note that the out-of-pocket limits for Medicare Advantage plans do not include the cost of prescription drugs, which are covered separately and have separate, unlimited cost-sharing).

Where can I find information on what cost-sharing my plan requires?

Your health insurance ID card may provide some or all of this information. It’s common for ID cards to list the plan’s copay and deductible amounts, and the coinsurance percentage, but the exact dollar amount of the coinsurance charge will depend on the amount of the claim, since it’s a percentage rather than a flat dollar amount.

You can also find comprehensive information in your certificate of insurance, certificate of coverage, or summary plan description (SPD). These are all names used for a document published by your health plan that explains the terms and conditions of your health insurance policy. The certificate of insurance will list the amount of your individual and/or family deductible as well as copayments or coinsurance amounts you will be required to pay for covered services.