Do you know how actuarial values are determined?
Even in the insurance world, the term “actuarial value” wasn’t used until the Affordable Care Act (ACA) came into play. Since the first days of ObamaCare, there has been a lot of confusion about what it is and why it is even important. While there are many definitions out there, people are still having trouble comprehending what the term means.
Today, we want to help to define this term and offer why you should pay attention to it. Now that the Affordable Care Act is in affect this term is going to be very important.
Actuarial Value Defined
One of the reasons for the confusion is because actuarial value is used to determine multiple areas.
- It is used to structure the 4 metals (Bronze, Silver, Gold and Platinum) of different health plan. This is helpful when trying to decide which plan to purchase.
- It helps to define the cost sharing subsidies for low-income families and individuals.
- It is used to determine the minimal or lowest cost of the Bronze plan.
Another way actuarial value is used is to determine the total averaged cost or “true cost” for your health benefits that your insurance covers. It will come in a percentage form and is consider the precise value of your plan.
For example, if you chose a Silver Plan offered through ObamaCare, the actuarial value of that plan is 70%. That means you are required to pay 30% of the cost of your benefits.
Healthcare.gov is careful to say that “depending on you actual health care needs and terms of your insurance policy” you may be paying more than that 30%.
What Actuarial Value Cannot Do
According to the American Academy of Actuaries, all actuarial values are calculated on an “average basis for a give population”. So, even when you are comparing different plans it will be difficult to see which plan is valuable to you.
The actuarial values also don’t include what the individual consumer may consider important like premiums, the quality of a provider network, customer service, and wellness programs.
Why Actuarial Value IS Important To You
Even though an actuarial value may not come into play while you are picking out your health plan, this term still has a tremendous effect on the choices you make. If the actuarial value is not accurately estimated, it can affect the cost you have to pay. If it is over-estimated, you will see higher deductibles, higher co-pays and pay more out-of-pocket expense.
To ensure that you don’t have unexpected costs for your health insurance, contact our office. We can help to find the perfect plan for you and your family.
847-397-5300 or toll free 800-317-0181, ext. #306