The IOM and the Inconvenient Truth of the Affordable Care Act’s Real Affordability

Jaan Sidorov

Posted 10/10/11 on the Disease Management Care Blog

Enshrining a term only an actuary could love, the Affordable Care Act sets health insurance coverage on the basis of “actuarial value” (AV).  A good summary can be found in this Consumers Union Health Policy Brief.  As the Disease Management Care Blog understands it, AV is the percent of typical medical expenses that a health insurance policy will cover for a typical population.  In other words, some individuals will have no out of pocket expenses (deductibles, coinsurance and limits) while other individuals will have end up paying for most of their services.  When those expenses are rolled up over thousands of persons and compared to total health care costs, the percent left over is the “AV.”

Once the Disease Management Care Blog wrapped its head around the AV, it next tackled the ACA concept of the “essential health benefit” (EHB).  This is the minimum package of covered services (outpatient, emergency room, maternity, hospitalization, medications, rehabilitation and the like) that a health insurer must include in its coverage plan.  This will ultimately be defined in yet-to-be-determined federal regulations.

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