Colorado Division of Insurance
Actuarial Value
What is Actuarial Value
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A measure of how rich a specific design is
 PPACA describes this as the amount of health
care costs paid by the plan
4 tiers (metal levels)
 Platinum (90% of costs)
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Gold (80% of costs)
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Silver (70% of costs)
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Bronze (60% of costs)
Actuarial Value vs. Essential Benefits
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Actuarial Value
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A measure of the out-of-pocket costs faced by
consumers
One of the biggest determinants of premium
Plan specific
Essential Benefits
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Determine what is covered
Determine the denominator of the AV calculation
Same for the entire market
Calculation of Actuarial Value
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Actuarial Value
2 broad methods for calculation
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Plan Specific
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Standard
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Individual carriers define the transformations to the standard the
Carrier data is used to determine the costs
A standard population and costs are used
Plan calculation can be more accurate but would
result in different AVs for the same plan design
Smaller Provisions
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Automated processing of actuarial value
HSA contributions counted as first dollar
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Who determines AV if there are contributions
Cost Sharing Subsidies
Interactions between Large Group/ERISA plans
still to be determined
De Minimis Variations
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The bulletin indicates that all plans inside and
outside the Exchange will need to follow the
metal levels
Plans will need an actuarial value within ±2% of
the target
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For example all silver plans will have an actuarial
value between 72% and 68%
Individual Market
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Plans need to change on a yearly basis to stay
within the metal tier (Deductible leveraging)
Colorado law makes changing benefits difficult
The market will be reset on 1/1/2014 since
plans will not fall in de minimis ranges
Some additional initial disruptions
Small Group Market
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Same issues as the individual market
Small employers have better existing tools for
plan comparison
Small employers have additional
communications challenges making changes
more costly
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Small employers explain the health plan to
employees
Small employers have additional requirements
Cost Sharing Subsidy
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Adjustments to a silver benefit design to reduce the AV for
low income members
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100-150% 94% AV
151-200% 87% AV
201-250% 73% AV
First reduce OOP max
Make additional adjustments to lower the AV
New plan designs are allowed to use the de minimis
variations
Initial payments based on rate filings followed by a detailed
reconciliation