Actuarial value is a summary measure of the coverage provided by a health insurance plan. It estimates the percentage of medical expenses a plan would cover for the average person. Actuarial value can range from 0 percent (i.e., covers nothing) to 100 percent (i.e., covers everything).
For example, if a plan has an actuarial value of 60 percent, the insurance company will pay 60 percent of covered medical expenses (on average). The individual(s) covered by the plan would pay the remaining 40 percent (on average).
Why actuarial value matters
When you buy individual and family health insurance, you get to choose from hundreds of different plans. With so many options to choose from, narrowing in on the right one can be difficult. Complex cost-sharing rules make side-by-side comparisons time-consuming. The idea behind actuarial value is to help you better assess which plans fit your needs.
For example, to help you narrow down your plan options, the Marketplace categorizes health insurance plans by metal tiers.[1] Each metallic level represents an actuarial value:
- Bronze plans have an actuarial value of roughly 60 percent
- Silver plans have an actuarial value of roughly 70 percent
- Gold plans have an actuarial value of roughly 80 percent
- Platinum plans have an actuarial value of roughly 90 percent
Actuarial value provides limited value
Actuarial value is a useful starting point for selecting a plan, but it does not help you decide which one is best for you. Here are a few reasons why.
Actuarial value does not reflect a plan’s cost-sharing. Copayments, coinsurances, and deductibles often vary within the same metal tiers. Based on your expected personal medical expenses, one option may be much better for you than another with the same actuarial value.
Actuarial value does not reflect all of the plan’s covered services. Only services that are considered essential health benefits count in the calculation. Plans often cover additional services that actuarial value ignores.
Actuarial value does not reflect the insurance company’s service. Different insurance companies provide different levels of customer support via phone support, mobile apps, and concierge services.
Actuarial value does not reflect a plan’s provider network. A plan’s actuarial value ignores its network’s quality and size. The calculation also only applies to in-network coverage, ignoring any out-of-network benefits.
Actuarial value does not reflect whether the plan is compatible with a health savings account (HSA). You’ll need to check separately whether the plan allows you to contribute to an HSA.
Actuarial value does not reflect the premium. A premium is the cost of a health insurance policy. In general, health insurance premiums increase as actuarial value increases. However, exceptions are possible.
Use actuarial value to understand your high-level health insurance options. Then, dive into each plan’s details to pick the right one for you and your family.
Notes
[1] Because it's difficult for insurers to design plans with an exact actuarial value, the federal government allows a rough range. For more information, see the regulations.
