A key phrase in the health insurance bills produced by Max Baucus and the House health committees is “actuarial value.” It is intended to provide an apples-to-apples comparison of health insurance plans as it shows the percent of estimated costs for a population group that the insurance policy would cover.
If that sounds confusing, it is. The idea seems to have been developed by Roland McDevitt, a Ph.D. with consulting firm Watson Wyatt Worldwide.
The House bill would mandate insurance policies that cover 70 percent of the expected health expenses for a year but would still allow deductibles and out-of-pocket maximums comparable to limits on health savings account contributions under current law.
The Baucus bill would go a little further and allow insurance policies that cover just 65 percent of expected health expenses.
McDevitt provided an estimate of actuarial values of some “illustrative benefit packages” for the Congressional Research Service. He estimates an actuarial value of 75 percent for a “typical employer-sponsored Health Savings Account (HSA)-qualified high-deductible health plan (HDHP)” with a $1,500 annual deductible, 20 percent coinsurance, and $3,000 overall out-of-pocket maximum is 0.76, which rises to 0.93 if the employer’s assumed HSA contribution of $750 is included.
It is not clear how many people in the insurance industry are even familiar with the concept of actuarial value, so I do not know how many existing policies actually would meet the minimum creditable coverage standards of the Baucus bill or the House bill.
In a paper for the California Healthcare Foundation explaining actuarial value, McDevitt examined 32 individual market plans available on ehealthinsurance.com for a 32-year-old in Los Angeles County in 2006. McDevitt calculated actuarial values ranging from 0.34 to 0.86, with just five plans having meeting the 0.70 threshold and eight meeting the 0.65 mark. The average plan had an actuarial value of 0.56 and 15 had actuarial values under 0.50. While premiums were not directly tied to actuarial values, the plans with an actuarial value greater than 0.65 had an average premium of $236 per month versus an average of $154 per month for plans with a lower actuarial value. More comprehensive coverage was 53 percent more expensive — $984 a year in 2006.
While your insurance policy might be allowed to continue as long as nothing about it changes and nobody new can purchase the policy, the health insurance changes put forward so far will effectively force you and millions of other Americans out of the health insurance policies you chose on your own, not to mention the millions more whose employers will change or eliminate insurance. You will then likely pay higher cost for the insurance they are allowed to purchase through the government-created exchange.
