Premiums on the individual market tend to be higher in rural areas than urban areas, according to new findings from the Robert Wood Johnson Foundation and the Urban Institute.
Benchmark premiums were 9% higher in rural areas than urban areas in 2016, and 10% higher in 2017, the authors found. This translates to $26 more per month in 2016, and $39 more per month in 2017—hundreds of dollars per year.
Some of the greatest cost disparities occurred in Nevada, Colorado, and Illinois.
Lack of provider competition largely, if not predominantly, drove this disparity, the analysis says. Rural areas generally have fewer providers than urban areas to begin with, and the unyielding trend of consolidation is creating an even tighter market.
As The Atlantic reported earlier this year, rural hospitals increasingly face a difficult choice: Be acquired or leave the community with no hospitals at all. In rural areas where the local hospital is the predominant employer, as is often the case, closure can mean economic ruin.
And hundreds of rural hospitals are at risk of being shuttered, according to the National Rural Health Association.
But “less competition in provider markets may necessitate insurers pay higher payment rates to hospitals and/or physicians, which increases premiums,” the analysis says.
Reinsurance programs, created in several states, “can help stabilize these pools in more rural areas to help insurance companies want to participate further,” according to the Urban Institute’s Erik Wengle, lead author of this analysis.
They don’t necessarily make an immediate impact on prices but can effectively reduce prices long-term, he said. Down the road, states may consider a “more aggressive” approach: working with insurance companies to negotiate provider payment rates, he added.
While a permanent federal reinsurance program could benefit struggling states across the country, it would likely have to be established through legislation—which is “a heavier lift,” Wengle noted. That's not to say it wouldn’t be worth it. According to Wengle, one of the biggest benefits of reinsurance is that it benefits the unsubsidized population, “who kind of get left in the lurch here.”