The lower premiums in urban areas were partially connected to more competition among plans and providers. Having more plans also means they can spread the financial risk rather than having one or two payers shoulder all of it, leading to lower premiums.
However, the Urban Institute said that’s not the only factor in the difference.
“Though the ACA requires that insurers treat the entire state as a single risk pool, insurers may not follow that requirement when they set their premium; this is difficult to verify. Thus, premium differences may be partially attributable to differences in health care needs between rural and urban populations,” according to the report, which received support from the Robert Wood Johnson Foundation.
Beyond payer competition, provider competition is another factor. Rural areas usually have fewer providers, which can lead to higher payment rates to hospitals and physicians, increasing premiums.
And issues arising from lack of competition may be getting worse. A recent Government Accountability Office analysis found that 64 rural hospitals closed because of finances and healthcare changes between 2013 and 2017, twice the number of the previous five years. Medicaid expansion helped hospitals. Only 17% of rural hospital closures happened in expansion states.
That finding was backed by a recent report by the Georgetown University Health Policy Institute and the University of North Carolina’s NC Rural Health Project that found Medicaid expansion was especially helpful to low-income adults in small towns and rural areas. The expansion helped providers, too. Uncompensated care became Medicaid payments with expansion of the program. Medicaid pays less than private insurers, but it’s still better than chasing down payments from people who can’t afford them and ultimately not getting any reimbursement for services.
Urban Institute researchers looked at 40 states with predominantly urban and rural rating regions. The average benchmark premium was higher in the rural areas in 32 states in 2016. Rural benchmark premiums were 9% higher than in urban areas in 2016. That was $26 more per month. In 2017, rural benchmark premiums were even higher than in urban areas (10% higher, or $39 per month).
Some states saw double-digit differences, including Nevada. People in rural areas paid 46% and 45% higher rates in 2016 and 2017 respectively. The highest difference in any year was Nebraska. Rural areas paid 51% higher premiums in 2017 compared to urban regions.