What is Actuarial Value?

Actuarial Value is the percentage of benefits paid compared to the eligible expenses of a plan.

Is this an official Actuarial Value?

No. This is an illustration using our model (ClearPATH Actuarial Value Calculator). The department of Health and Human Services (HHS) has made available to the public an excel based AV calculator that could be used to determine the actuarial value of plans. The federal calculator must be used to officially determine Minimum Value scores.

Further, the ACA specifies the federal calculator only applies to essential health benefits. Essential health benefits are comprised of 10 categories of care that will comprise a very large percentage of covered services for any plan. In our model, the entire range of benefits is considered.

How does the ClearPATH Actuarial Calculator compare to the Federal Calculator?

For each plan simulated, the value found using our calculator fell within two percentage points of the AV score estimated by the federal calculator. These results demonstrate the accuracy of ClearPATH, and they provide support for the validity and usefulness of the ClearPATH Actuarial Calculator. You can download our full report here.

What population is used in this calculation?

The Affordable Care Act specifies that Actuarial Value is computed based on the health expenses that are expected to be incurred by a standard population, rather than the population that a plan actually covers. Our standard population model is based on the 2014 Statistical Abstract published by the US Census Bureau, Department of Commerce

What about HSA’s and HRA’s?

HHS has announced that for purposes of calculating the AV of an employer health benefit plan, the annual employer contribution to the employee’s HSA associated with a qualifying HDHP and the amount made available for the first time in a given year under a HRA that is linked to an employer health benefit plan shall be considered part of the benefit design of the health plan.

What about Out-of-Network benefits?

The Center for Consumer Information and Insurance Oversight (CCIIO) has announced they intend to propose that the Actuarial Value only consider the in-network benefits.

What if a plan doesn’t fit into the AV calculator?

HHS will permit such plans to obtain an actuarial certification that the plan design fits into the calculator logic or to obtain an actuarial certification that adjustments to the AV calculator-produced value are appropriate.

How does AV relate to premium costs?

Premiums and actuarial value tend to be correlated. Products with more comprehensive benefits and higher actuarial value tend to have higher premiums. But there are other factors that determine premium such as demographics and the general health level of the group.

The AV Calculator is a statistical model based on a standard population and frequency and cost levels that approximate average prices in 2016. The tool is very useful for modeling the relativities of different plan designs or to see the relative cost of the various health care categories from the newly designed Standard of Benefits and Coverages format. You will notice the AV calculator corresponds to the standard format as promulgated by the Affordable Care Act.

The tool also breaks down out-of-pocket costs between deductibles, co-pays, and coinsurance.

The price itself is not specific to any group, thus the tool cannot be used to determine an actual price. Rather, it can only be used to compare relativities. (Contribution Health has other tools available for actual price calculations.)

Data Sources

Data is obtained from various sources – widely published insurance company benchmarks, Department of Labor statistics, data published by the Health Care Cost Institute, the National Health Expenditure Projections, published by the CMS Office of the Actuary and other sources. The standard population is consistent with the Agency for Healthcare Research and Quality, Department of HHS, Medical Expenditure Panel Survey, 2010 Population Characteristics File. (AHRQ-MEPS-HC). The various sources projects average expenditures of about $5,300 per person in 2016 under employer sponsored insurance. This figure is consistent with projected employer populations and consistent with OMB projections for exchange products.

The core model is for 1,000 members and centered at around $5.3 million of cost, or about $5,300 per member per year.