The Affordable Care Act (ACA) Actuarial Value Calculator is a tool designed to help determine the level of coverage provided by health insurance plans under the ACA. The calculator uses a mathematical formula to estimate the percentage of health care costs that a plan will cover for a typical population. The Center for Medicare and Medicaid Services released updated Actuarial Value Calculator methodology for the 2024 plan year.
This article will explain what the Actuarial Value Calculator is, how it works, and what it means for employees and employers.
What is the Actuarial Value Calculator?
The Actuarial Value Calculator is a tool created by the Centers for Medicare and Medicaid Services (CMS) to help determine the level of coverage provided by a health insurance plan. It is used by insurance companies to calculate the actuarial value (AV) of a plan, which is a measure of the percentage of medical costs that the plan will cover. The AV is calculated based on the expected costs of medical services for a standard population.
How does the Actuarial Value Calculator work?
The Actuarial Value Calculator uses a formula to estimate the level of coverage provided by a health insurance plan. The formula takes into account the cost-sharing features of the plan, such as deductibles, copayments, and coinsurance, as well as the covered services and the expected utilization of those services by the standard population. The result of the formula is the actuarial value, which is expressed as a percentage.
The AV ranges from 60% to 90%, with plans in the lower range providing less coverage and plans in the higher range providing more coverage. For example, a plan with an AV of 60% would cover 60% of the expected medical costs for a standard population, while a plan with an AV of 90% would cover 90% of those costs.
What does the Actuarial Value mean for employees?
The Actuarial Value of a health insurance plan is an important factor to consider when choosing a plan. A plan with a higher AV will generally have higher premiums but lower out-of-pocket costs, while a plan with a lower AV will have lower premiums but higher out-of-pocket costs. Employees should consider their health care needs and financial situation when choosing a plan.
Under the ACA, plans with an AV of 60% or higher are considered “minimum essential coverage” and meet the requirements of the law. Plans with an AV of 90% or higher are considered “platinum” plans and are the most comprehensive plans available. Plans with an AV between 70% and 80% are considered “silver” plans and are the most commonly purchased plans on the ACA marketplace.
In addition to the AV, employees should also consider the provider network, covered services, and drug formulary when choosing a health insurance plan.
What does the Actuarial Value mean for employers?
Employers who offer health insurance plans are required to meet certain standards under the ACA, including the provision of a minimum level of coverage. The Actuarial Value Calculator can help employers determine whether their plan meets the minimum level of coverage required by the law.
The Actuarial Value Calculator also allows employers to compare the level of coverage provided by their plan to other plans available on the ACA marketplace. This can help employers ensure that their plan is competitive and attractive to their employees.
Employers should consider the impact of the calculator on their employees and communicate plan features clearly to ensure that employees can make informed decisions about their health care coverage.
Conclusion
The Actuarial Value Calculator is an important tool for employers and employees to determine the level of coverage provided by a health insurance plan.