A Tool to Improve Policymaking in Health Care Affordability

For the first time, Connecticut can reliably define affordable health care and the impact that policymaking has on health care affordability for households across the state. The Connecticut Healthcare Affordability Index (CHAI) is a new tool designed to help policymakers understand the real costs of health care and the challenges that Connecticut residents face in meeting their basic needs. Using detailed data on monthly expenses for multiple household sizes and types, and factoring in demographic characteristics, the CHAI estimates that 18% of Connecticut households with adults under the age of 65 currently face unaffordable health care costs.

Defining Affordable Health Care

Before we in the Office of Health Strategy (OHS) and Office of the State Comptroller (OSC) were able to quantitatively define health care costs, we worked with a group of stakeholders such as payers, health providers, and patients, to develop a qualitative definition that goes beyond traditional measures like those the Affordable Care Act used, i.e., premium as a percentage of household income. We wanted our definition for affordable health care to reflect that health care is just one of many expenses people face each month and includes more than one monthly premium payment. Our definition:

Health care is affordable if a family can reliably secure it to maintain good health and treat illnesses and injuries when they occur, without sacrificing the ability to meet all other basic needs including housing, food, transportation, childcare, taxes, and personal expenses or without sinking into debilitating debt.

Using this definition, OHS and OSC built the CHAI in collaboration with researchers from the Center for Women’s Welfare at the University of Washington School of Social Work (UWSSW) and from the University of Connecticut Analytics and Information Management Solutions (UCONN AIMS). The project was partially funded and guided by the CT Health Foundation and the Universal Health care Foundation of Connecticut.

The CHAI measures the impact of health care costs, including premiums and out-of-pocket expenses, on a household’s ability to afford all basic needs, like housing, transportation, childcare, and groceries. The CHAI builds off the Self-Sufficiency Standard for Connecticut, a tool originally developed by our partners at the University of Washington, that identifies what income is required for families in Connecticut to afford their basic needs without any financial assistance. It calculates that income for over 700 family types in the state and accounts for multiple demographic factors including race, ethnicity, and primary language. The CHAI then adds additional details that heavily influence health care costs such as type of insurance coverage (marketplace, employer-sponsored, or Medicaid), age, and health risk (low, medium, and high).¹ The CHAI calculates health care costs and affordability for 19 different household types across Connecticut, accounting for demographic differences.

Below is a sample output of the CHAI, modeling an individual living in New Britain, Conn., between the ages of 18 and 34 with a low health risk, and the income they need to afford all their basic needs.

*This calculation was performed prior to the passage of American Rescue Plan Act.

Estimating the Impact of Policy

Using outputs like the one above, we can assess how different households experience health care affordability, so that we can create targeted policies, or examine how proposed policies might affect affordability. Using the CHAI, and a broader analysis, we found that:

• Health care is significantly more affordable for people with employer-based coverage than for those buying plans in the individual marketplace. (Report pre-dated American Rescue Plan Act [ARPA] additional subsidies)
• Households with young children experience higher rates of inadequate income and are at the greatest risk of being unable to afford health care costs.
• Because the cost of health care increases with age due to increased utilization, older adults purchasing coverage in the individual market face additional burdens.
• Geography plays a factor. High-cost areas of the state face unique affordability challenges as do families in urban centers.
• Single parents — particularly Black, Indigenous, People of Color (BIPOC) single mothers — are the most likely to struggle to afford the basic needs of their households including health care costs, according to the data.

Once complete, we used the tool to create a Connecticut Household Health Care Spending Target, which allowed us to quantitatively define affordable health care.

In Connecticut, households with two adults purchasing health care can afford to spend no more than 7% to 11% of their monthly household expenses on health care, including premium and out-of-pocket costs, and households with one adult, 6.8% and 9.5%, in order to meet all their basic needs.²

Health care is considered unaffordable for any household whose health care spending exceeds the household spending target. The health care spending target for a particular household will depend on the household’s composition.

Using the CHAI, we can measure the impact of policy proposals or newly passed legislation on the spending target and health care affordability. For instance, the spending target was initially identified before ARPA. We put the tool to use immediately to measure the policy’s impact on health care affordability. After updating the household spending target, we found that the expanded premium tax credits offered through ARPA resulted in an additional 35,000 households in Connecticut achieving health care affordability.

The CHAI will continue to be used to model policies in Connecticut that aim to improve health care affordability, like the recently created Covered Connecticut Program,³ which provides full premium and cost sharing wraparound coverage for individuals with incomes between 160% and 175% of the federal poverty level, who enroll in silver level plans offered through Connecticut’s marketplace, Access Health CT. We also hope to model other affordability policies like additional premium and cost sharing assistance, new health insurance options, and the impact of various policies on insurance rates.

With the CHAI, for the first time, we have an affordability tool that utilizes state level cost of living; race, ethnicity, and language; and other factors that decidedly affect the costs of health care.  While we expect to routinely use the CHAI at OHS and OSC, we hope to also engage legislators, policymakers, and health care stakeholders in future modeling to better inform the impact of future policy proposals.

NOTES

¹ Risk categories were calculated using the CT All-Payer Claims Database and a risk grouper.

² Medicare-age and other adults in categories not considered part of the workforce are outside the scope of the target.

³ June Special Session, Public Act 21-2.