Small risk pools may contribute to rural areas’ challenges with private insurance plans, but risk reinsurance, or insurance for the insurer, could be a potential policy solution, according to a new study.
A health insurance risk pool is a group of individuals whose medical costs are combined to calculate premiums.
“A lot of our prior work on market-based insurance has shown that premiums tend to be higher in rural areas, and there is anecdotal evidence, often put forth by insurers, that a lack of health care providers is a factor in making insurance more expensive,” says author Abigail Barker, a research assistant professor, faculty lead for data and methods at the Center for Health Economics and Policy at the Institute for Public Health at the Washington University in St. Louis.
“Insurers are sometimes required to contract with certain providers in order to satisfy network adequacy standards, but this research suggests that a more important factor is likely to be the low numbers of lives covered in a particular place,” says Barker.
“The model controls for provider availability and various other possible explanations, and I find that additional enrollment is the factor most associated with lower premiums,” she says. “This makes sense because insurance is fundamentally about spreading risk, and it relies upon having large numbers of people in a given risk pool in order to work well.”
Using data from the 2013-16 Federal Employees Health Benefits Program, Barker focused on premium and enrollment data for “state-specific” plans—which offer insurance policies and set premiums at the regional level.
In nonmetropolitan counties, she found that each additional plan enrollee was associated with a 10-cent lower per capita biweekly premium, whereas this effect was trivial in metropolitan counties.
“Low health care provider counts were not associated with higher premiums in nonmetropolitan areas, nor was the degree of insurer competition an important predictor of premiums,” she says. “However, there was substantial correlation over time, which suggests that some variables may be viewed less as sources of premium variation and more as influencing long-term premium levels.”
Barker’s current work for the Rural Policy Research Institute focuses on understanding how markets can be successfully integrated into the health care sector, using the Affordable Care Act and Health Insurance Marketplaces data as well as Medicare Advantage data to inform rural health policy.
The paper appears in the journal Health Affairs. The researchers will present their work at the National Press Club in Washington, DC.
