ACA Premiums Costlier in Rural America

A lack of competition among payers and providers in rural areas means consumers who live there have fewer, more-costly coverage options.

Premiums for silver plans under the Affordable Care Act can be 40% higher or more in rural areas than in urban areas, an analysis of federal data shows.

Urban Institute researchers found premiums were cheaper in 2016 and 2017 for urban silver plans, which cover about 70% of healthcare costs.

The study found that states with the largest premium differences between rural and urban areas in 2017 were Tennessee ($415 urban vs. $601 for rural) and Nebraska ($368 urban vs. $555 rural). In 2016, the greatest gap occurred in Colorado ($282 urban vs. $402 rural) and Nevada ($272 urban vs. $398 rural).

The researchers speculate that the price differential is a function of competition. Even though urban healthcare systems are more expensive, they have larger populations that invite competition and spread the risk, thus lowering premiums.

Rural areas generally have a lower cost of living, but the lack of population density is a disincentive for payers and providers.

"Although many factors go into the cost of coverage, competition among providers seems to be the critical factor driving premiums lower in America's urban centers," said Anne F. Weiss, managing director at the Robert Wood Johnson Foundation, which sponsored the study.

"Less competition among providers in rural areas means consumers are paying more. Therefore, policy solutions should recognize the unique needs of rural communities," Weiss said.

Maggie Elehwany, vice president of government affairs and policy at the National Rural Health Association, says rural Americans often have only one coverage option.  

"Since rural patients have no plan choice and are often forced into a plan they can't afford—most purchase a bronze plan with high deductible," Elehwany says. "When they get sick, they can't afford the bill and the provider has to subsidize the cost."

That cycle, she says, exacerbates the ongoing closure crisis for rural hospitals.

The researchers also found that areas with narrow network Medicaid-managed care plans—which now offer private coverage to low-income residents—or provider-sponsored plans, which are offered directly by a health system or group of doctors instead of a traditional insurance company were associated with significantly lower premiums in 2016 and 2017.

In contrast, areas with Blue Cross Blue Shield health plans featuring wider networks of doctors and hospitals generally had higher premiums in 2016. By 2017, most BCBS plans implemented narrower networks similar to those used by provider-sponsored plans, ultimately decreasing their premiums.