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Insurers are quitting Obamacare — and rural America will pay the price

Map showing the divide between rural and urban counties with one insurer projected for 2017
Counties projected to have one insurer in 2017. More rural counties are left with only one insurer.

The exit of large insurance plans from the Affordable Care Act marketplaces is likely to hit rural areas of the country the hardest.

A new Vox analysis shows that the number of rural counties on the Healthcare.gov marketplace with just one insurer will nearly quadruple between 2016 and 2017.

In 2016, 7.8 percent of rural counties reported one insurer available. But in 2017, that number is expected to rise to 30.7 percent.

The number of rural counties with just one insurer nearly quadrupled from 2016 to 2017

Rural areas of the country have long struggled to attract insurance plans. The small populations and low concentration of doctors and hospitals makes it difficult for them to compete.

“It’s tough in these rural markets, because it’s not like these rural markets were really competitive to begin with before ACA,” said Michael Dickstein, an economist at New York University who has studied insurers’ participation in the health law’s rural markets.

The marketplaces initially seemed like they might be able solve that problem, giving insurance plans a new online platform where they could more easily reach individual consumers. But now, with some insurers exiting, there are questions about how much Obamacare can actually do to spur competition in areas of the country that are already underserved by the health care system.

Almost a third of rural counties will have one insurer in 2017, compared with 19.6 percent of urban counties

Rural counties

2017

Urban counties

2017

The decline in competition on the Obamacare marketplaces spans the entire country, but it’s taking an especially large toll on rural areas.

There are many ways to determine if an area is rural. But for the purposes of this article, we classified any county as rural where the census reported 50 percent or more of its total population as rural.

Urban areas are also facing the lowest level of competition on the marketplace since 2014. But only 19.6 percent of urban counties on Healthcare.gov are currently down to one insurer — compared with 30.7 percent of rural counties.

Much of the reduced competition is due to exits from large insurance players like UnitedHealth and Aetna, which collectively exited the marketplace in 23 states. These plans often sold to an entire state and leave behind rural counties that have few options.

Take Texas, for instance. In 2017, 28 percent of Texas’s 254 counties will have only one insurer. But rural Texans are disproportionately impacted — the number of rural counties reduced to one insurer in 2017 is double the number of urban counties. Currently, there are 48 rural counties projected to have one insurer in Texas in 2017, compared with 24 urban counties.

Twice as many rural counties in Texas are losing insurers in 2017

Map showing the difference in the number of rural and urban counties in Texas with one insurer in 2017

Rural states also struggle to attract new competitors.

As my colleague Sarah Kliff found in her reporting, the startup health plan Canopy Health initially planned to enter both the Wyoming and Nevada marketplaces in 2017, which would have been a boon to Wyoming, as it has struggled to attract insurers and only has one currently. But Canopy has decided not to expand as other carriers have pulled out of the exchange.

Why rural America is struggling to attract insurers

The lack of insurance competition facing rural America isn’t a new problem — and Obamacare isn’t entirely to blame.

Even before the Affordable Care Act passed, many areas with low population had limited competition and high uninsured rates.

Data from the Health and Human Services Department shows that Obamacare has substantially lowered the uninsured rate in rural areas. The number of uninsured individuals fell by a third, from 21.6 percent in 2013 to 14.4 percent in early 2015. And monthly premiums for rural consumers with tax credits have remained pretty consistent, only rising by an average of $5 between 2015 and 2016.

Other forces, meanwhile, have conspired that might make it more difficult for insurance plans to expand their presence in rural areas. For example: Since 2010, 76 rural hospitals have closed. The number of closures reported just since 2013 is more than in the previous decade. Some hospitals have struggled to generate enough revenue as states have declined to expand Medicaid programs.

“I don’t think anyone expected what happened with the Supreme Court and the Court telling states you could opt out of the expansion of Medicaid,” said Maggie Elehwany, vice president of government affairs and policy at the National Rural Health Association. “People insured under Medicaid were now not, and they weren’t getting preventive care. Hospitals have had to absorb that cost.”

One way Obamacare could attract more insurers to rural areas

After the first year of the ACA in 2014, Dickstein and a team of Stanford researchers began to look at how insurance regulations might affect competition and premiums.

Even though the ACA is a federal mandate, states are allowed to define their own coverage regions, or rating areas,” which are used by insurers to set premiums and rates. Prices will vary significantly from one rating area to another, as insurance plans try to estimate how sick people are in a given geographic area.

Take a state like Florida, for instance. It has 67 counties and has chosen to define 67 coverage regions. But then you have a state like Tennessee that has 95 counties and only 8 rating areas. In Tennessee, many counties — some rural, some urban — get lumped together in each region.

Dickstein found that when states combined smaller, less populated counties with larger neighboring urban areas into a single rating area, it was really good for rural counties. The included rural markets saw on average 0.6 to 0.8 more insurers, plus significantly lower premiums.

Tennessee has been particularly hard hit by UnitedHealth’s pullout in 2017, with 57 counties left with one insurer option. But there are rural counties that are doing okay. A small rural county like Fayette had more insurer options and lower premiums because it was in the same coverage area as Shelby County, where Memphis is. So even with UnitedHealth pulling out, Fayette will have three insurer options in 2017.

How a state defines insurance rating areas can impact choice in rural counties

Aug 30, 2016 10:57 PM EDT 	Map showing the difference rating areas can make in coverage options for rural counties in Tennessee

Meanwhile, a smaller rural county like Cannon, which is adjacent to the larger urban county Rutherford, but not in the same coverage area, only has one insurer option in 2017, while Rutherford has three — showing that when smaller rural areas are isolated in their own coverage regions, choice can suffer.

Dickstein does caution that there are limits to this approach. You can’t make the coverage region too big, as you risk the region becoming too dissimilar and decreasing choice.

“I think thinking about how rating region areas are set up — including more rural areas with urban areas, which typically have a more desirable population — could help change the landscape of the number of insurers participating,” said Dickstein.