What is '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.

BREAKING DOWN 'Actuarial Value'

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.

Examples of How Actuarial Values Work with the Affordable Care Act

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.

RELATED TERMS
  1. Health Plan Categories

    Health plan categories refers to the four types of health insurance ...
  2. Actuary

    An actuary is a professional who assesses and manages the risks ...
  3. Actuarial Equity

    Actuarial Equity is the calculation of an insurance premium based ...
  4. Actuarial Equivalent

    Actuarial equivalent refers to insurance benefit plans that are ...
  5. Actuarial Assumption

    An actuarial assumption is an estimate of an uncertain variable ...
  6. Actuarial Consultant

    An actuarial consultant is a professional who advises clients, ...
Related Articles
  1. Investing

    Affordable Care Plans: Bronze, Silver, Gold, Platinum?

    How to choose among the different coverage levels in the Health Insurance Marketplace. Which metal makes the most sense for you?
  2. Personal Finance

    Career advice: accounting versus actuary

    Read about what life is like as an actuary or as an accountant, how the two careers are different, and how to decide which is best for you.
  3. Financial Advisor

    Career advice: Financial versus actuary analyst

    Read an in-depth comparison between financial analysts and actuaries, what it's like to work as each, and how to determine which is best for you.
  4. Personal Finance

    The Top 5 Skills Every Actuary Needs

    The actuary profession is growing fast. Here's a look at the majors and top skills one needs to become a successful actuary.
  5. Insurance

    3 Huge Medicare Drug Plan Price Hikes on the Way

    December 7 is the 2017 enrollment deadline for Medicare Part D. Be aware of these price increases – and how to minimize them – before you make a decision.
  6. Insurance

    What You Need To Know About Student Health Insurance

    Before heading off to college, read up on health insurance plans.
  7. Managing Wealth

    Who Spends the Most on Healthcare Now? The Wealthy

    The wealthy are now spending more on healthcare than the poor and middle class. But why?
  8. Insurance

    Buying Private Health Insurance

    Getting your own policy isn't easy or cheap but in some cases, it's well worth the effort.
  9. Insurance

    Tips for Finding Affordable Health Insurance

    One of the easiest ways to save money is to compare health plans sold on an exchange and those sold directly through an insurer.
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  3. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  4. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  5. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  6. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
Trading Center