‘Obamacare’ presents new challenges for rural Americans

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.

4 thoughts on “‘Obamacare’ presents new challenges for rural Americans

  1. Max Huppertz

    I actually blogged about this as well. I really don’t get how the issue of insurance providers not bothering to cater to rural markets is supposed to be about the ACA.
    Health insurance is a prime example for market failure. In fact, the ACA is probably not going far enough; state-provided insurance would give the government the ability to directly set premiums (or just forgo premiums and just have tax-funded health care).
    Anyway, the ACA is providing subsidies, so for people in these rural areas health insurance coverage is actually affordable for the first time in… ever.
    So if you want to talk about the middle class supposedly suffering, fair enough, we can have that discussion. But the supposed “troubles” of rural Americans really aren’t due to health care reform. They’re due to massive market failure, and existed long, long before the ACA was even being debated. Rural Americans are really benefiting from this.

  2. lippmanb

    I thought the point of an affordable care act is to extend coverage to all people. It is clear that the act is not working if there are so many people who cannot afford it.

  3. mrosidi

    I think the government should run a public insurance system for who cannot afford ordinary health insurance. Reliance merely on private sector will not work or costly partly due to market failure as stated by a comment above.

  4. meethoon

    I think a whole point of designing the ACA is helping more poor people. As you said, and there will be still a lot of people who cannot afford this kind of stuff but I think it will not be the case because of the less competition among the insurance company inside of rural area.

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