What is a health plan's "actuarial value"?

The "actuarial value" of a health plan refers to the percentage of total healthcare costs that the plan will cover on average for a standard population. This metric provides insight into the level of coverage offered by a health plan, as it reflects the amount that the insurer will pay for covered services as opposed to the amount that the insured individual will pay out-of-pocket in deductibles, copayments, and coinsurance.

Understanding actuarial value is critical for individuals when comparing different health plans because it helps to evaluate and assess the financial risk associated with a plan. A higher actuarial value indicates that the plan covers a larger share of healthcare costs, thereby reducing the financial burden on the insured. For example, a plan with an actuarial value of 70% means that, on average, it covers 70% of an enrollee's healthcare expenses, while the remaining 30% would be the responsibility of the insured.

In contrast to other options, considering the total cost of premiums provides a snapshot of what one pays for the plan but does not reflect the coverage level. The maximum out-of-pocket limit pertains to caps on spending rather than coverage percentages. The number of services included in a plan does not indicate how much of the cost is covered