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Member Research & Reports

Member Research & Reports

WashU: Higher Health-Insurance Premiums in Rural U.S. May be Due to Small Risk Pools

Small risk pools may contribute to the challenges faced by private insurance plans in rural areas, suggesting that risk reinsurance, or insurance for the insurer, might be a solution, finds a new study from the Brown School at Washington University in St. Louis.

Previous research has shown that premiums tend to be higher in rural areas, and the study finds that an important factor is the low number of people covered in a particular place, said research assistant professor Dr. Abigail Barker, who is also affiliated with the Center for Health Economics and Policy at the university’s Institute for Public Health.

“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,” she said. “The strong association of the county enrollment variable with the premium suggests that a useful policy for promoting affordable insurance in rural areas is reinsurance, which could help mitigate the risk of high-cost outliers in small geographic areas.”

Using data from the 2013-16 Federal Employees Health Benefits Program, Dr. Barker focused on premium and enrollment data for “state-specific” plans — which offer insurance policies and set premiums at the regional level.

In non-metropolitan 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. “There was substantial correlation over time, which suggests other factors also influence long-term premium levels,” she said.

The study was published Dec. 3 in the December issue of the journal Health Affairs. Dr. Barker presented her findings Dec. 4 during an event at the National Press Club in Washington, DC.

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Photo: Dr. Abigail Barker

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