What does the term "actuarial value" refer to in healthcare?

The term "actuarial value" refers to the percentage of total average costs for covered benefits that a health plan will pay. This metric is crucial in understanding how much coverage a health plan provides and is typically expressed as a percentage. For instance, if a health insurance plan has an actuarial value of 80%, it means that, on average, the plan will cover 80% of the healthcare costs for enrollees, while the remaining 20% will be the responsibility of the insured individuals through deductibles, copayments, and coinsurance.

This concept is important for consumers when comparing different health plans, as it helps them gauge not just the premium cost but the overall financial protection the plan affords against healthcare expenses. Actuarial value is particularly useful in the context of the Affordable Care Act, which established minimum standards for health plans related to actuarial value tiers (e.g., bronze, silver, gold, and platinum).

Evaluating actuarial value alongside other plan features enables individuals to make informed choices based on their healthcare needs and financial situations.