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S = min(M, min(X, D) + c * max(0, X - D)); P = X - S
| Inputs | Definition | Unit |
|---|---|---|
M | Annual out-of-pocket maximum, the most the member pays in cost sharing in the benefit year | currency |
X | Allowed cost of the covered care used by the member during the benefit year | currency |
D | Annual deductible, the allowed cost the member pays in full before coinsurance applies | currency |
c | Share of allowed cost above the deductible paid by the member, entered as a decimal (0.2 for 20%) | proportion |
S | Cost sharing paid by the member over the benefit year for allowed cost X | currency, for example dollars |
|---|---|---|
P | Amount the plan pays for the member's allowed cost X | currency |
Function
Actuarial value calculation function for health plan cost sharing
Maps a health plan's cost-sharing rules and the allowed costs of a standard population over one benefit year to the share of those costs that the plan pays. Each person's allowed cost is split into the cost sharing paid by the member and the remainder paid by the plan, and the plan's total is divided by the total allowed cost. The records follow the notation of the Actuarial Value article, where X is allowed cost, S is cost sharing and P is the plan payment. Premiums appear in neither term.
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Implementations
Excel
Member cost sharing and plan payment in two cells
The first formula returns the member's cost sharing from named cells Allowed, Deductible, Coins (the member's coinsurance rate) and OOPMax; the second returns the plan payment from the allowed cost and the cell holding the first result, named MemberPays.
=MIN(OOPMax,MIN(Allowed,Deductible)+Coins*MAX(0,Allowed-Deductible)); =Allowed-MemberPays
Assumptions
One deductible, coinsurance rate and limit for all services
One deductible, one coinsurance rate and one out-of-pocket maximum apply to all covered services, with no copayments and no services paid before the deductible. Copayments and cost sharing that varies by service type add further steps, which the US calculator handles service by service.
Deductible no larger than the out-of-pocket maximum
D does not exceed M, and all amounts are allowed (not billed) charges for the same benefit year. The CMS 2027 calculator checks that the deductible is less than or equal to the out-of-pocket maximum.
Worked examples
Member with $2,500 allowed cost under the $2,000 deductible plan
A member with allowed costs of $2,500 pays the $2,000 deductible plus 20% of the $500 above it, $2,100 in all, and the plan pays $400, as in the article.
X = 2500; D = 2000; c = 0.2; M = 6000; S = 2100; P = 400
Member above the out-of-pocket maximum under the $2,000 deductible plan
Allowed costs of $30,000 are above the $22,000 at which the cap is reached, so the member pays the $6,000 maximum and the plan pays $24,000, 80% of that person's cost.
X = 30000; D = 2000; c = 0.2; M = 6000; S = 6000; P = 24000
Member below the deductible under the $2,000 deductible plan
Allowed costs of $500 are below the deductible, so the member pays all of them and the plan pays nothing, as for the 40 people in the article's low spending group.
X = 500; D = 2000; c = 0.2; M = 6000; S = 500; P = 0
Common errors
Entering the plan's coinsurance share as the member's rate
The CMS AV Calculator expresses coinsurance as the share of spending the plan pays, whereas c is the member's share. Entering 0.8 for a plan that pays 80% gives a member payment of $2,400 instead of $2,100 at an allowed cost of $2,500.
Leaving out the out-of-pocket maximum
Without the outer min, a member with $30,000 of allowed cost would pay $7,600 rather than the $6,000 limit. The plan payment for heavy users, who account for most of the spending, is then understated, and so is the actuarial value.
Sources
CMS 2027 AV Calculator deductible, coinsurance and MOOP steps
Centers for Medicare & Medicaid Services, Center for Consumer Information and Insurance Oversight. Final 2027 Actuarial Value (AV) Calculator Methodology. Washington, DC: CMS; 25 February 2026. Section Calculating AV, Steps 4 to 7: plan-covered expenses before the deductible is met, in the coinsurance range between the deductible and the maximum out-of-pocket (MOOP), and above the MOOP, where the plan covers all expenses. Step 5 states that the calculator expresses coinsurance rates as the percentage of spending the plan pays.
Canonical Identity
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