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Measure of Generosity of Employer Sponsored Health Plans: an Actuarial Value Approach

Thomas G. Moehrle


The Bureau of Labor Statistics traditionally compiles and publishes data on individual provisions of employer-sponsored health insurance plans, such as whether the plan provides coverage for home health care or what amount of deductible must be paid before the plan pays benefits. There is, however, growing interest by health regulatory agencies for information on overall health plan “generosity“—what proportion of health care expenditures are paid by an insurer. The Patient Protection and Affordable Care Act, for instance, requires all health insurance plans offered in the individual and small group markets—whether purchased within or outside of State Exchanges—to be scored by the level of generosity measured by their actuarial values (AV). The AV of a plan is a summary estimate of the financial protection provided by a health plan. AV's are expected to be used by purchasers of health insurance in the small and individual markets as a measure to compare among plans. An AV calculator computes these estimates of generosity as percentages of covered health costs paid by insurers or other third-parties. For this research, I use the AV approach to estimate the average generosity of employer-sponsored health plans. To do this, microsimulations are used that draws health expenses from a standard population and estimates insurance payments using a claims-payment procedure. Healthcare expenses for the microsimulations are estimated from the Medical Expenditure Panel Survey administered by the Agency for Healthcare Research and Quality. Using these expenditures, insurance payments are estimated from the claims-payment procedure using cost-sharing parameters obtained from information gathered from health insurance Summary Plan Descriptions collected from the National Compensation Survey conducted by the Bureau of Labor Statistics. AV estimates of health plans are generated across several establishment and occupational characteristics that can be used by analyst to assess differences in health plan generosity across the labor market. These measures along with existing benefit provisions data that BLS publishes should provide a more complete picture of employer-sponsored healthcare benefits offered to American workers.