Actuarial Value and Obamacare

Sometimes you picture me
I'm walking too far ahead
You're calling to me
I can't hear what you've said
--Cyndi Lauper

Nice insight into one of the drivers of health insurance policy cancellations under Obamacare.

In order to be compliant with the Affordable Care Act (ACA), an insurance policy must have an actuarial value (AV) that falls within one of four bands:

Platinum: estimated to cover 90% of enrollee's costs (AV = 90), plus or minus 2%
Gold: AV 80 +/- 2
Silver: AV 70 +/- 2
Bronze: AV 60 +/- 2

A plan outside of these bands is noncompliant under the ACA. So, for example, a policy that covers 95% of enrollee costs is too generous and is substandard under the law.

If the AV of your policy is 59, 72, 80, or 91, then "you can keep your plan." However, if your policy has an AV of 64, 76, 87, or 98 then your plan will be cancelled.

To demonstrate the pointlessness of this policy, a plan with an AV of 98 is deemed to pay too high a percentage of an enrollee's health care costs. To be ACA compliant, this plan must provide fewer benefits, and enrollees will face higher out-of-pocket costs.

A plan offered in 2013 can have any AV. But beginning January 1, 2014 all ACA compliant plans must fall within one of the four AV bands noted above. Approximately 15 million Americans with individual policies will be the first segment affected. Later in the year, tens of millions of Americans who get insurance through group plans will face cancellation when their policies come up for renewal.

As deductables, out-of-pocket maximums, and prices of medical goods and services change in future years, so will the AVs of particular plans--meaning that plans that are ACA compliant one year could be non-compliant the following year.

Why did Congress write this pointless standardization into the law? As they jammed the health care bill thru the system in late 2009, ACA proponents famously said that the bill needed to be passed to find out what was in it.

While the consequences were predictable at that time, bureaucrats behind the law still do not understand what they have wrought.