888-765-5400Affordable Care Act & Actuarial Value
The term “actuarial value” has not been frequently used, even in the insurance business…yet! Even those in the business may have a hard time understanding it and even harder time explaining it. But the Affordable Care Act (ACA) uses actuarial value to describe many of the requirements and restrictions for compliant plans, so it becomes increasingly important to understand and explain what this term means and how it applies in a post-ACA world.
Actuarial value is often seen as the “true” value of a plan. It is the percentage of covered costs that the plan expects to pay for an enrollee in the plan. As an example, a person with a plan that had an actuarial value of 70% would be responsible for on average 30% of the cost of the covered benefits under the plan. Depending on the behavior of the enrollees in the plan, the actual value of the plan may vary slightly. Until the passage of ACA, “actuarial value” was not a household term. Long-time insurance employees likely have a loose grasp on the concept, but in the post-reform world, it will be a commonly used tool to estimate the true value of a plan.
Metal Levels
As Exchanges are implemented and begin open enrollment on October 1 of 2013, all people will begin to choose coverage based on a particular “metal level” – bronze, silver, gold, or platinum. Each metal level is representative of how rich a plan is, based on the average estimated actuarial value of 60%, 70%, 80%, and 90% respectively. Every plan must cover a certain identified set of benefits deemed “essential” and certain preventive services are covered at 100%. Some plans may cover more than the minimum essential health benefits. This additional coverage will be reflected in the plan’s actuarial value. Plans could vary in the way co-pays, coinsurance, and deductibles are applied, which means that two plans at the same metal level could cost individuals with the plans in different ways. For small group plans, which may also be offered on the Exchange through a Small Business Health Options Program (SHOP) portal, there are deductible limits of $2,000 per individual and $4,000 per family. A proposed rule released in November 2012 did provide some potential for flexibility for plans that were unable to meet bronze-level coverage (60% actuarial value) without exceeding these limits. All of the ACA subsidies are based on the cost of the second-lowest silver plan, meaning the second least costly plan with an actuarial value of 70% – cost-sharing subsidies may only apply to silver level plans – likely making this the most popular level of plan.
This information has been prepared by Blue Cross and Blue Shield of North Carolina to assist our customers in understanding Health Care Reform. This publication is for information purposes only. It is not legal or tax advice. Please consult with your attorney or tax advisor for further advice. As regulations and other interpretive guidance are published, this information may change. We will continue to work with our customers going forward to provide updates and further assistance. 11/30/2012 U#7259aae
For more information on health insurance coverage in North Carolina, please visit our website at www.nchealthplans.com or call our toll free number 888-765-5400 and speak with one of our professional agents. Our agency provides coverage for health insurance in North Carolina through Blue Cross Blue Shield of North Carolina (BCBSNC). You may qualify for a 15% healthy lifestyle discount if you are in excellent health. Call us for details.