Enrollment and PCP Density Influence Rural Public Payer Premiums

December 10, 2019 - Enrollment and primary care provider density may have more impact on rural healthcare premiums than market concentration, a recent study published in the December issue of Health Affairs found.

“In the study of health insurance access and affordability in rural areas, a recurring issue is to understand the challenges that programs based upon the competitive market model, such as the Affordable Care Act’s Marketplaces, may experience in less populated areas,” Abigail R. Barker, Brown School of Social Work, Washington University and the report’s author, explained. “These findings suggest that small risk pools may contribute to the challenges faced by private plans in rural areas, in which case risk reinsurance is a potential policy solution.”

The study looked at the Federal Employees Health Benefits (FEHB) Program, the first public payer program that used a competitive market to govern the cost of its plans, like Medicare Advantage (MA) or an Affordable Care Act (ACA) marketplace. These three programs now cover 41 million Americans as of 2018.

Previous studies have shown that in rural counties these programs have higher premiums and lower access to zero-premium plans, as opposed to metropolitan and micropolitan regions.

In MA plans, for example, urban premiums were lower, on average, and city residents enjoyed more widespread access to zero-premium plans in urban areas (95 percent) compared to rural areas (73 percent).

READ MORE: Medicaid Enrollment a “Lifeline” for Rural Residents, Children

There are a variety of possible influences contributing to these disparities. The Barker hypothesizes that population size is a key factor. Small communities force healthcare payers to spread the risk over a fewer number of people.

Additionally, with an especially low supply of providers in rural regions, healthcare payers and health systems may have no choice but to employ more costly providers or maintain a smaller network with low diversity in skillset.

As a result, rural healthcare policymakers are stuck between a rock and a hard place: wanting to mandate larger networks to meet healthcare needs but also knowing they have to set reasonable goals for healthcare payers or else no one will be in compliance.

State-specific plans are more prevalent in urban areas than non-urban, with 90.4 percent of urban counties, 80.3 percent of micropolitan regions, and only 55 percent of rural counties having access to state-specific plans from 2014 to 2016. Moreover, in 2016, urban counties had on average more state-specific plans (9.66 plans) than either micropolitan (3.61 plans) or rural (2.26 plans) counties with access to state-specific plans.

Using data from the Office of Personnel Management, Barker studied 173 “state-specific” plans offered by 56 companies.

READ MORE: ACO Investment Model May Improve Care Delivery in Rural Areas

“In general, both non-metropolitan county types had worse health indicators, lower incomes, and larger land areas than metropolitan counties did,” she found.

Metropolitan areas had more providers, more hospital beds, and more plan competition than urban areas.

When it came to average premiums per capita, however, the results were rather surprising to some. There were similar average premium per capita levels across urban ($220.76), micropolitan ($218.49), and rural ($215.69) counties.

Instead, enrollment was the factor that vacillated the most and had the greatest effect.

Urban areas saw on average 1,085.9 enrollees, micropolitan counties had around 34.0 enrollees, and rural regions had on average only 15.0 enrollees. The study found that non-metropolitan enrollee increase added $0.10 to the average biweekly premium per new enrollee, while enrollment had little impact on urban premiums.

READ MORE: Reinsurance Programs Reduce Individual Market Premiums by 16.9%

Other factors that may have had peripheral influence over the premium per capita rates included mortality and density of providers.

The study found that mortality resulted in a $2.62 premium increase in metropolitan areas and a $2.67 premium increase in nonmetropolitan counties.

Having more providers per square mile to offer primary care services had some effect in nonmetropolitan counties, leading to nearly higher premiums. The same metric had very little effect on metropolitan counties’ premiums.

Ultimately, the hypothesis that higher market concentration would necessarily lead to higher premiums proved to be false.

“This is likely due in part to the fact that the state-specific plans in the FEHB Program market must be responsive to premiums set by the nationwide plans,” Barker explained. “This could help explain the relationship between mortality and premiums, since national plans set premiums based upon national data, while state-specific plans can incorporate local or regional mortality data to determine optimal premiums. However, the degree to which they can do this depends upon how dominant the national plans are in an area.”

Since enrollment was the major factor influencing premiums, Barker underscored reinsurance as a potential solution. She also suggested providing more financial support for providers’ fixed costs, such as acquiring medical devices and EHR software.

Reinsurance has seen a resurgence among state Medicaid programs, with recent data demonstrating that reinsurance can lower premiums by 16.9 percent in the first year alone. Most recently, Colorado finalized its plan to pursue reinsurance.