Actuarial Value

Actuarial value is the percentage of total average costs for covered benefits that will be paid by a health insurance plan. Under the Patient Protection and Affordable Care Act (ACA), the U.S. health reform enacted March 23, 2010, health plans available on the Health Insurance Marketplace are divided into four “metallic” tier levels – Bronze, Silver, Gold and Platinum – based on the actuarial values. Bronze plans, for example, pay on average 60% of the medical costs of covered benefits. Silver plans pay 70 percent, Gold plans pay 80 percent and Platinum plans pay 90 percent.

By default, the actuarial value represents the corresponding percentage that will be paid by the individual policy holders. For example, if a Bronze plan pays (on average) 60 percent of covered medical expenses, Bronze policy holders would be responsible for (on average) the remaining 40 percent of the expenses excluding premiums, which are not included as part of the calculation.

Actuarial value represents the average across the entire population covered by the plan. But the percentage any given individual pays will be all over the place. So if, like most people, you only use your health coverage for small stuff (like checkups, tests, prescription drugs, etc.), then the percentage of medical costs your plan pays will be a lot less than 60 percent, and almost everything will come out of deductibles and copays. However, if you’re one of the few people who has a major medical expense in a given year, then your bronze-level insurance plan will cover much more than 60 percent of the cost.

Health insurance plans, regardless of their actuarial value, have various deductible, copayment and coinsurance levels that affect the monthly premium and how (and even when) the individual will pay for medical care. Health plans can differ greatly even within the same actuarial level. For example, Bronze Plan A might offer a $5,500 deductible and 0 percent coinsurance for a monthly premium of $250, while Bronze Plan B offers a $2,700 deductible with 50 percent coinsurance for a monthly premium of $300. The person with Bronze Plan A will spend more money to reach the deductible, but after that he/she will pay nothing (the 0 percent coinsurance) for covered medical expenses. The individual with Bronze Plan B, on the other hand, will pay less to get to the point where coinsurance kicks in, but once it does, he/she will be responsible for half (50 percent coinsurance) of covered medical expenses.