Actuarial Value and Employer-Sponsored Insurance

About this Research Brief

This paper explores the distribution of plan AVs for individuals enrolled in employer-sponsored insurance.  This brief was written by PierreL. Yong, M.D., M.P.H., John Bertko, F.S.A., M.A.A.A., Richard Kronick, Ph.D.

Sherry A. Glied, Ph.D.
Assistant Secretary for Planning and Evaluation

Richard Kronick, Ph.D.
Deputy Assistant Secretary for Health Policy

According to this preliminary analysis, the vast majority — at least approximately 98 percent — of enrollees in Employer-Sponsored Insurance (ESI) are enrolled in plans that meet and exceed an Actuarial Value (AV) of 60 percent whether a hybrid or internal approach is utilized to assess AV. Because there are so few individuals in plans with AVs below 60 percent when assessed against a relatively broad package of services (as illustrated by the FEHBP-PPO plan) in the hybrid approach, and because services such as hospital, physician, and pharmacy benefits account for such a large fraction of the spending in the relatively broad package, the choice of the broader or narrower package of services described in this paper has little effect on the estimated fraction of people in plans with an AV below 60 percent. Plans with benchmark AVs falling below 60 percent are likely PPO plans with high deductibles, in which most individuals do not reach the annual deductible, or so-called mini-med plans, which have low annual limits.