Take a look at the chart below. It reflects the fact that all commercial health insurance must fit within four metallic bands: Bronze, Silver, Gold and Platinum. Each band is defined by its “actuarial value” – which is the percent of covered benefits the plan is expected to pay. For example, a Bronze plan is expected to pay between 58% and 62% of health care costs for a representative enrollee. A Silver plan is expected to pay between 68% and 72%. And so forth.
Now here is what is really strange and it is explained superbly by Bob Graboyes, a health economist with the Mercatus Center, in this video. There are gaps between the corridors. And if your plan happens to fall within one of the gaps, it is no longer a valid plan.
Suppose you are in a Bronze plan with an actuarial value of 58%. Then, a year from now, because of price changes, technology changes, or some other kind of change, your plan suddenly covers 60% of expected expenses. That’s good for you, right? Wrong. Because your plan no longer fits into one of the metallic corridors, it’s no longer a valid plan – despite the fact that it has become a better plan!