Under Obamacare, some rural insurance markets fare better than others

The Affordable Care Act gives states discretion on how they define insurance coverage regions. On one end of the spectrum, Florida uses each county as its own market. On the other, Texas counts major cities as their own regions and lumps the rest of the state together in one giant area.

How those geographic boundaries are drawn has a clear impact on pricing and options, particularly for people living in rural regions, according to a policy brief from the Stanford Institute for Economic Policy Research. Rural residents tend to fare better if their area is grouped with an urban neighbor.

“Bundling rural counties with larger, more urban neighboring regions appears to have a meaningful impact on the supply of plans available to rural residents,” wrote Michael Dickstein, an assistant professor of economics at Stanford.

And, it leads to cost savings: between $200 to 300 less annually for a single, middle-aged buyer choosing the benchmark plan, or one that sets the standard for coverage.

Differing prices within states – and regions within states – was also the subject of a recent New York Times analysis.  Reporters Reed Abelson and Agustin Armendariz examined options available in Colorado and found “a kind of pricing pandemonium is underway, one that offers a case study of the ambitions and limits of the Affordable Care Act during this second year of enrollment.”  

And this Kaiser Health News report by Jordan Rau highlighted wide discrepancies in ACA premiums nationwide. That piece focuses on a largely agrarian region of Georgia, one of the most expensive places in the nation to purchase a marketplace plan due to high rates of chronic disease and only one major hospital system and insurer to choose from.

In the latest Stanford study, Dickstein gathered government data from 33 states that use the federal exchange, and studied the size and make-up of the insurance coverage regions. California uses its own marketplace so it wasn’t included in the study.

A state which sharply illustrates the study’s findings is Tennessee, Dickstein explained in an interview with Reporting on Health. There are rural areas outside both Memphis and Nashville that have nearly identical demographics. The region outside Nashville did not get lumped in with its nearby urban area, while the one near Memphis did.  For rural residents near Memphis, that grouping resulted in better prices and more insurer options.

The findings raise the question of whether policy makers should choose larger region sizes that include major population centers, or even establish one nationwide market for insurance. Considering alternative region definitions could encourage more insurers to serve rural areas, but expanding them too widely may also lead to challenges.

“There is a trade off,” Dickstein said. “If we have large regions, like an entire state or country, you might end up with fewer insurers entering because it’s difficult to set up networks with providers.”

Even though California wasn’t included in this analysis, Dickstein said the state’s approach appears to be smart one. It divides its vast territory into 19 pricing regions. San Diego County is one region, while Los Angeles County gets divided in half. Rural areas such as Mono, Inyo and Imperial counties, where the population density is far lower, are combined even though they’re not all adjacent.

“California is one of the better cases where it seems regulators did a good job of linking areas that are most similar,” Dickstein said. “The fact that Los Angeles County is split is evidence of that.” 

The ACA’s state-by-state variation, not only in these geographic divisions but also in the law’s overall implementation, is fertile ground for research into health coverage differences, Dickstein said.

“There’s a lot of interesting questions to study within the ACA because states had a lot of discretion,” he said. “We’re exploiting state-by-state variation to understand how it affects rural areas.”

 Photo by Noel Pennington via Flickr.