Setting and Valuing Health Insurance Benefits
"This report briefly describes some of the key concepts and policy issues around specifying and valuing health insurance benefits.

“Actuarial value” is a summary measure of a health insurance plan’s benefit generosity. It is expressed as the percentage of medical expenses estimated to be paid by the insurer for a standard population and set of allowed charges. An actuarial value may also be referred to as a “benefit rate.” One purpose of an actuarial value is to distill all the benefit and enrollee cost-sharing
provisions of a health insurance plan into a single number, for easier comparisons among plans.
For example, under Massachusetts’ health reform, individuals purchasing unsubsidized coverage through the Connector have the choice of three benefit levels: Gold, Silver and Bronze. A Gold benefit package must be actuarially equivalent to the Gold package specified by the Connector, with low copayments and no deductible. The Gold benefit package has an estimated actuarial value of 93%. The Silver benefit package that an insurer develops can have greater cost-sharing (e.g., a deductible, higher copayments) but must have an actuarial value between 67% and 81%. The Bronze package must have an actuarial value of roughly 56%."