What does the term "actuarial value" signify in health insurance?

The term "actuarial value" signifies the percentage of health care expenses that a health insurance plan is expected to cover on average for a typical group of enrollees. It provides a measure of the financial protection a health plan offers, reflecting how much of the total medical costs will be borne by the insurer versus the insured.

For example, if a plan has an actuarial value of 70%, this means that the insurer will cover approximately 70% of the healthcare costs incurred by the policyholder, while the policyholder will be responsible for the remaining 30%. This concept is crucial for both consumers choosing a plan and for insurers when designing their offerings, as it helps to set expectations for out-of-pocket expenses and overall affordability of the plan.

The other choices do not accurately reflect the meaning of "actuarial value." The total annual cost of a health insurance plan does not take into account the percentage of costs covered. The geographical spread of insurance costs relates more to pricing strategies rather than coverage percentages. The lifespan value of a health insurance policy is not a recognized term in the context of health insurance benefits or coverage levels.