Middle-class Americans, who can’t afford to pay $500+ per month for their health insurance but don’t qualify for the generous government subsidies, have been deemed the losers from the Affordable Care Act. I’ve previously written on the inequalities of American healthcare in this blog post from January. However, the Wall Street Journal reported today additional disparities between health insurance premiums for residents of urban versus rural counties. This discrepancy of rates could further damage the effectiveness of the ACA in America.
The reason for higher rates in rural counties comes back to the supply side of health insurance – or the insurers. Having less demand (or fewer people) to serve is the first and foremost reason that insurance providers are not entering these markets. The second, equally important aspect is the increased risk that rural populations bring. In rural counties, household income is generally much lower than in urban areas.
“In the 515 counties with only one insurer participating in the federally run marketplace, average household earnings were $56,766 in 2012, more than 20% below the national level, census data show.” (WSJ)
In addition, lifestyles in rural areas tend to lead to worse health conditions for residents than in urban areas (I won’t get into the reasoning for this discrepancy, but for more information see this study). This means a greater chance of cashing in the insurance to pay for health care and thus less profit for insurers. These conditions are causing providers to simply stay out of markets with low profit potential.
With fewer providers and less competition in the market, suppliers can dictate prices within the market. This means that rural counties with only one provider – Blue Cross Blue Shield, in particular – will have much higher prices due to monopolistic market effects. One example of this discrepancy comes from a rural Florida resident, Rebecca Stephens.
“Rebecca Stephens, an office manager from Wauchula, Fla., recently discovered there was only one health insurer offering coverage in rural, low-income Hardee County, and the midlevel plan she wanted to buy cost about $200 more a month than a similar plan in nearby Tampa.” (WSJ)
The “marketplace,” as government website HealthCare.gov was meant to be, can benefit consumers if providers have to compete for their business. The key to success moving forward will be finding ways to increase the number of available options. ‘Obamacare’ will have to find a solution to the rural versus urban issue by ensuring companies are entering rural markets, as well as the higher income, urban ones. While subsidies are helping some middle-class Americans afford these higher premiums, others are being completely overwhelmed by up to a 500% increase in their health insurance plans. Most Americans simply can’t afford that.