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Affordable Care Act Health Insurance Metal Levels and What They Mean

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The metal level designations of Affordable Care Act health insurance plans reflect their actuarial value. The actuarial value of a health insurance plan is a concept birthed by The Affordable Care Act (ACA). One of its uses is to compare different plan designs and determine the effect that different cost-sharing provisions have on cost sharing. Its significance varies with consumers. affordable care act insurance

Under the ACC there are two approaches to the structure of the actuarial value. One approach is for plans with similar designs to have similar actuarial values. The other is one in which the actuarial value corresponds directly with the expected share of spending which the health plan would pay. The ACA does not explicitly define actuarial value. But the language in the bill suggests that it reflects the average share of medical spending paid by an insurer rather than that paid out-of-pocket by consumers. 

Therefore, the meaning of actuarial value to most is the percentage of covered medical expenses paid by a health plan. The metal levels and the percentages they represent are as follows:

  • Bronze – 60%
  • Silver – 70%
  • Gold – 80%
  • Platinum – 90%

Thus, insurers assume the greatest portion of shared spending for platinum-level plans and the least for bronze ones. Conversely, the percentage of covered expenses that patients have to pay in the form of copayments, deductibles and coinsurance, is highest for the bronze-level and lowest for the platinum-level plans as follows:  

  • Bronze – 40%
  • Silver – 30%
  • Gold – 20%
  • Platinum – 10%

There tends to be an inverse relationship between the metallic levels and premiums. But that might not always be the case because premiums incorporate factors that are not included in the calculation of the actuarial value.

Insurance companies calculate the actuarial value of plans based on the average use of medical insurance by a standard population.  Since insurance plans use sets of data from different populations a standard population can vary between plans and may not reflect an individual’s use of insurance or his or her needs. Thus, the actuarial value does not necessarily correlate with a given individual’s out-of-pocket expenses.

Another reason for the divergence between the metal levels and out-of-pocket expenses is differences in negotiated fee payments to providers and utilization management strategies between plans. A plan with lower negotiated fees and with more effective utilization management will have a lower actuarial value because the members on a whole will be less likely to reach their deductibles or exceed their maximum out-of-pocket costs. That plan in turn would expect to spend less for the medical care of its members than those with less effective cost containment measures. In this case it is possible that one’s out-of-pocket expenses with a bronze level plan might be less than those of a higher metal-level plan.

Therefore, use of the actuarial value in choosing between plans is not helpful in predicting potential out-of-pocket expenses. Rather, it is a tool for comparing the relative generosity between plans. Moreover, from a consumer point of view, the significance of the metal level is inversely proportional to the proximity of a person’s out-of-pocket expenses to the out-of-pocket maximum unless it is well below the annual limit set by the Affordable Care Act. That is because the actuarial value of a plan is academic once a consumer has exceeded that maximum. The reason is at that point the insurer must pay 100% of the allowable charges for the remainder of the policy year.

The metal level is very significant though with respect to Affordable Care Act subsidies. It defines the benchmark for calculating the subsidies. That benchmark is the second cheapest silver-level plan sold on the health exchange of a respective state.

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