Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Actuarial value is a measure of insurance coverage
  • Obamacare requires minimum value of 60 percent insurance payments
  • ACA plans have four tiers: platinum, gold, silver, and bronze
  • Actuarial value compares the insurance and customer share of the costs
  • Actuarial value is an average of costs of the benefits in a plan

Actuarial value is the percentage of total average costs for covered benefits that a plan will pay. The consumer must pay the balance left uncovered, and actuarial value informs the consumer’s real costs of insurance.

The four tiers in Obamacare have plans with a similar average actuarial value. The top rank is platinum, and the lowest rank is bronze.

Although plans have a similar actuarial value, they can differ substantially in coverage and essential benefits. Comparison shopping can go beyond premiums and costs sharing to find the best value for the consumer’s situation.

Enter your zip code above and find the right priced health insurance for you!

Setting Actuarial Value

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The Centers for Medicare and Medicaid maintains insurance oversight through the Center for Consumer Information and Insurance Oversight or CCIIO. This important oversight and assessment group reviews plan information and apply a complex formula to the terms of each plan approved for sale on the Obamacare Marketplace and exchanges.

They determine compliance with the standards of the Affordable Care Act for tier value and minimum value.

One must review plans carefully to find value. Some bronze plans may have a value of about 62 percent while others may have values of about 69 percent.

In effect, one can get silver plan coverage for the price of a bronze plan by comparing actuarial values.

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CMS Follows the Law

The CMS follows the formula set out in the ACA and in the rules that carried it out. The annual calculator is a vital part of assessing the plans for the minimum value and for the value that consumers expect given the tier ranking in the Marketplace.

The law requires calculation of actuarial value on the basis of essential health benefits provided to a standard population. The variance permitted is small at plus or minus two percentage points.

Minimum Value in Obamacare

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Qualified Health Plans must exceed the minimum value standard of the Affordable Care Act. The standard requires a minimum value of 60 percent for all covered essential benefits. The insurance must cover at least 60 percent on average.

The minimum value standard applies to all major medical insurance sold in the US. Every plan on the Obamacare Marketplace or state health care Exchanges.

The CMS and other parts of the federal government use actuarial value to determine whether a plan has a minimum value for purposes of the Affordable Care Act.

Actuarial Value Measures Cost Sharing

Some consumers confuse the effects of actuarial value; the health plan actuarial value has a limited purpose. Actuarial value measures cost sharing in a plan but it does not measure costs. Actuarial value is not a cost-sharing maximum or minimum.

The actual costs of a year of medical service under a bronze plan may show sharing of 70 or 75 percent from insurance to 20 to 25 percent from the consumer.

Actual costs depend on the mix of medical services the consumer uses. Actuarial value is an average based on the average experience of similar insurance in large groups.

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Actuarial Value is Valuable Information

The actuarial value rating from an Obamacare plan is important information for the consumer. A plan with an average of 70 percent or above can qualify as a silver plan.

The silver plans are the system benchmark for those with incomes 400 percent of the federal poverty line.

Silver plans can get costs reduction assistance and, with high deductibles, they can pair with Health Savings Accounts for a powerful package of costs control.

  • Platinum plans have an actuarial value of 90 percent. The insurance pays an average of 90 percent of covered benefits, and the consumer pays 10 percent. In the CMS actuarial value formula, the appropriate minimum range is 88 percent to 92 percent.
  • Gold has a low coverage range of seventy-eight to 82 percent. These high-premium plans pay essential health benefits by an average insurance share of 80 percent to 20 percent for the consumer.
  • Silver plans have a coverage average of 70 percent or higher. As benchmark plans, the actuarial value of this group determines some significant benefits such as Marketplace programs for costs reduction assistance.
  • Bronze plans have the minimum value acceptable under the standards of the Affordable Care Act. They divide costs by 60 percent from insurance and 40 percent from the consumer. These plans have the lowest average premiums and the highest deductibles.

Shopping with Actuarial Values

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Some things depend completely on the actuarial value. For example, only silver plans can get Marketplace assistance for costs reduction, the Cost Sharing Reduction Subsidies that reduce out-of-pocket costs and lower the maximum expense limit.

The following items describe things to remember when selecting plans using the actuarial value.

  • CMS calculates actuarial value before applying premium subsidies.
  • Plans can have more actuarial value but not less than the tier level.
  • Actuarial value only uses covered essential benefits; one must make sure the benefit one seeks are covered in the plan.
  • Actuarial value is objective and does not relate to more important criteria such as consumer satisfaction and patient outcomes.

Actuarial Value Helps the Consumer

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It is not possible to measure the experience of each health plan user in advance to determine the costs they experience. Actuarial value is a good barometer because it deals with averages and essential health benefits.

The experience of everyone may differ, but over the entire group, it tends to be consistent.

Actuarial value assures the buyer that the content of the plan is as favorable as advertised.

Comparison shopping is an excellent complement to actuarial value. Consumers can compare plans across tiers, costs levels, types of services, or focus on a particular location.

Comparison shopping can find the best plan for a family or individual medical care preferences.

Enter your zip below to find the right private health insurance for you and your family; our free tool combines personal information like your medical needs and budget and matches them with plans from your state’s leading providers.