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Rural residents pay more for health insurance and have less to choose from, according to a researcher at the University of Minnesota.

Professor Jean Abraham with the University of Minnesota School of Public Health studied choice and pricing for individual insurance plans across the U.S. Her study, published in the Russell Sage Foundation journal, looked at changes in the insurer marketplace participation and plan premiums between 2015 and 2019 to assess their market vulnerability and volatility. 

Market vulnerability is the measure of how many insurers are in an area and what premiums they charge. Volatility is the degree of change in the marketplace over a time period. 

Abraham’s found that markets with higher volatility and vulnerability have smaller populations and are more rural, have a higher percentage of non-white people, lower average wages, a higher percent of the population reporting fair or poor health status, and are more likely to be in states that have chosen not to expand Medicaid. 

What she found, she said, was that rural areas were more likely to only have one insurer and higher premiums. The cause, according to Abraham, most likely relates to the lack of competition, both in the insurance market and in the healthcare market. 

“We know that competition brings prices down and there’s quite a bit of evidence speaking to that,” Abraham said. “It speaks to the competition in the insurance market, as well as the provider market competition. Often in rural areas, you will have maybe one hospital and very few providers and specialists. And that lack of competition leads to higher prices.” 

The higher prices are also related to the tendency of rural residents to be less healthy, older, less likely to engage in a healthy lifestyle, and fewer insurance consumers.

“There’s a scale issue for some insurers,” she said. “If you’re in a rural area and you still have to market and administer than plan, to what extent is the scale of the population there are potential enrollees to make it worthwhile. I think for a lot of insurers, there’s the question of do they have relationships with providers in those parts of the state.”

For rural residents, however, because of the Affordable Care Act (ACA), there may be a silver lining. For those making less money, subsidies in the ACA bring the premiums down, she said. 

“On the one hand, for rural residents having to face higher premiums and less choice tends to make insurance less attractive or affordable,” she said. “But the affordability issue is more complex just by the nature of the structure of the premium subsidies on the marketplace. Mainly the individual with household incomes between 100 and 400% of the poverty level qualify for subsidized coverage. Where it is particularly painful are individuals in rural areas who make more than 400% of the poverty level, so that’s about $51,000 for a single person this year. “

However, she said, states continue to pursue actions that ensure stability within individual markets by attracting insurers through government programs that absorb some of the expense of high-cost enrollees. Other options are to increase choice and affordability by offering a state-based public health insurance option and regulating short-term, limited-duration health plans to ensure they offer value for resident consumers.

Adding Covid-19 to the mix only creates new volatility in the individual insurance marketplace, Abraham said. While insurers are making decisions about plan options and premiums for the coming year, questions remain about who will buy the plans and how much they will rely on them.  

“Unemployment will remain high and people are worried about getting Covid-19. There is a real risk of hospitalization and the costs that come with that care,” said Abraham. “We have to keep monitoring the individual market because this type of coverage will be increasingly relied upon during the recession and insurers face considerably more uncertainty than normal with respect to who is purchasing coverage and how much medical care they may consume, given the pandemic.”