Actuarial Value and Employer-Sponsored Insurance. Internal Approach


The analyses above use the hybrid strategy of computing AV, using an external benchmark for covered services and an internal benchmark for cost-sharing. In an alternative approach, the internal benchmark approach, the AV of a plan is calculated as the share of expenses for the services covered by a plan (i.e., the set of services is determined by the plan) paid for a standard population given the plan’s own cost-sharing structure.  In this approach, both the covered services and the cost-sharing structure utilized for determining the cost of covered services (i.e., the denominator) are derived from the plan whose AV is being estimated.  Therefore the consideration of a broader or narrower benchmark is not relevant.

Using the internal benchmark approach, we estimate approximately 1.2 to 1.6 percent of individuals — approximately 2.0 to 2.6 million people — are enrolled in employer-sponsored insurance (ESI) with an AV below 60 percent in today’s marketplace.3

3  Composite of Actuarial Research Corporation (ARC) analysis of Bureau of Labor Statistics National Compensation Survey plan provision data (2005), HRET/KFF Employer Survey data (2006-2010), and estimated mini-med total enrollments.

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