What does actuarial value refer to in health insurance plans?

Actuarial value is a critical concept in health insurance that indicates the percentage of total health care costs that a health insurance plan is expected to cover for a typical population. In other words, it reflects the share of medical expenses that the insurer pays compared to what the insured individual pays out-of-pocket.

When a health insurance plan has an actuarial value of, for example, 80%, it means that, on average, the insurer pays 80% of health care costs, while the insured individual is responsible for the remaining 20%. This metric helps consumers to compare different health plans and understand the level of financial protection each provides.

The other options represent different aspects of health insurance but do not directly define actuarial value. Maximum out-of-pocket expenses refer to the maximum amount a policyholder will pay in a policy period before the insurance covers 100% of costs. Overall premium cost per individual relates to the monthly payment made for the insurance coverage, and deductible amounts are the expenses that must be paid out-of-pocket by the insured before the insurance kicks in. While these elements are important in understanding health insurance costs, they do not encompass the definition of actuarial value.