Actuarial Value: What Does It Mean?

Actuarial value is a term that has been frequently used in connection with health plans on the the federal and state exchanges. Let's take a minute to understand the term as a way to better understand the health reform law.

Actuarial value refers to the share of health care expenses the plan covers for a typical group of enrollees. The four tiers of health plans established by the ACA - bronze, silver, gold, and platinum - are based on the concept of actuarial value.  Each represents a different level of health insurance coverage. Thus, a platinum plan covers the greatest share of enrollees' medical expenses overall, while a bronze plan covers the least.

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For example, in a bronze plan, 60% of an individual's health care expenses are paid for by the plan.  The individual will then be responsible for 40% of expenses through some combination of deductibles, co-pays, and coinsurance, collectively called "cost-sharing."  The higher the actuarial value, the less patient-cost-sharing the plan will have on average.

The levels of coverage provided by the ACA are key to each individual's coverage and how each will perceive the effects of health care reform. 

For an estimate of deductibles and coinsurance that would meet the tier thresholds defined in the ACA, please visit this study by the Kaiser Family Foundation.  It explains the the coverage tiers established in the ACA, presents the actuarial estimates from thee well-established actuarial and benefits consulting firms, and discusses the potential policy implications.