DEFINITION of 'Actuarial Value'
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%, Gold plans pay 80% and Platinum plans pay 90%.
BREAKING DOWN 'Actuarial Value'
Actuarial values represent the average amount that a particular plan will pay toward covered expenses for all the insured people under that plan. By default, the value also represents the corresponding percentage that will be paid by the individual policy holders. For example, if a Bronze plan pays (on average) 60% of covered medical expenses, Bronze policy holders would be responsible for (on average) the remaining 40% of the expenses excluding premiums, which are not included as part of the calculation.
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% coinsurance for a monthly premium of $250, while Bronze Plan B offers a $2,700 deductible with 50% 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% 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% coinsurance) of covered medical expenses.