Cost Sharing

Key facts

Main forms

Deductibles, copayments and coinsurance

Not included

Premiums, balance billing and non-covered services

ACA plan limit

Annual out-of-pocket maximum for in-network essential health benefits

Medicaid limit

Premiums and cost sharing together capped at 5% of family income

Medicare Part D limit

Annual out-of-pocket cap since 2025

What is cost sharing?

Health plans rarely pay 100% of covered care. Cost sharing is the portion the patient pays at the point of care or after a claim is processed, and it is designed both to lower premiums and to discourage unnecessary use.

Cost sharing applies across commercial insurance, the ACA Marketplace, Medicare and, to a small degree, Medicaid, but the rules and limits differ sharply by program.

Types of cost sharing

Most plans combine several forms:

• Deductible: the amount a person pays each year before the plan starts paying for most services.
• Copayment: a fixed dollar amount per visit or prescription.
• Coinsurance: a percentage of the allowed amount, such as 20% of the cost of a service.
• Out-of-pocket maximum: not a charge but a yearly cap on cost sharing for covered in-network care, after which the plan pays 100%.

Cost sharing by program

Non-grandfathered ACA-compliant plans must cap annual in-network out-of-pocket spending at a limit HHS sets each year, and must cover recommended preventive services with no cost sharing. Original Medicare has no out-of-pocket maximum for Parts A and B, which is one reason many beneficiaries buy Medigap, while Medicare Advantage plans must have an annual in-network limit within a maximum set by CMS.

The Inflation Reduction Act capped annual Part D out-of-pocket spending starting in 2025. Medicaid allows only nominal cost sharing for most services, and some groups, such as many children, are exempt.

Why cost sharing matters

Cost sharing affects both patient behavior and product economics:

• Adherence: high out-of-pocket costs are linked to prescription abandonment, especially for specialty drugs with coinsurance.
• List price exposure: coinsurance and deductibles are usually based on a list-based price, not the net cost to the plan after rebates, so patient costs can track list prices.
• Copay assistance: manufacturer copay programs offset commercial cost sharing, but accumulator and maximizer programs can stop that assistance from counting toward deductibles. Federal rules on accumulators have been litigated, and a number of states restrict them.
• Forecasting: the Part D redesign changed patient costs for high-cost drugs, which affects demand estimates.