Health insurance less “generous” in rural states

By Amy Norton

NEW YORK (Reuters Health) – Americans who live in rural
states or work for small businesses get less bang for their
buck when it comes to health insurance, new research shows.

In a first state-by-state look at the “generosity” of
employer-based health insurance, researchers found that people
in largely rural states often paid more for the benefits they
got than their urban-area counterparts did.

The researchers gauged insurance plans’ generosity by
calculating their actuarial value – the percentage of an
employee’s medical expenses that the plan covers.

When average premiums were adjusted for actuarial value,
people in states such as Maine, West Virginia, Wisconsin and
Wyoming got the least value for their money, according to
findings published in the journal Health Affairs.

In contrast, residents of states with large urban
populations, including California, New York, Massachusetts and
Pennsylvania, tended to get more service for their dollar.

Similarly, the study found, people employed by the smallest
businesses paid an average of 18 percent more than workers at
large corporations, when their insurance premiums were adjusted
for generosity.

This latter finding may not be surprising, as large
employers have much greater leverage to negotiate with
insurers.

But the findings “put actual numbers on the conventional
wisdom” that small-business employees end up with less generous
health insurance, said lead study author Jon Gabel, vice
president of the Center for Studying Health System Change, a
non-partisan policy research organization in Washington, D.C.

Among these numbers was the fact that more than half of
workers at the smallest businesses – those with fewer than 50
employees – had to pay a deductible before their coverage
kicked in, versus 40 percent of workers at firms that employed
more than 1,000 people.

And when workers at large companies did pay a deductible,
it was lower: $386, on average, versus $599 for small-business
employees.

But the surprising finding, Gabel told Reuters Health, is
that insurance premiums in rural states, when adjusted for the
generosity of coverage, were higher. “We generally think of
health costs as being lower in rural states,” he noted.

Yet, the study found, the average adjusted premium for
California employees was roughly $2,800, whereas that figure in
Wyoming was $4,000. It was employees in Massachusetts who got
the most for their premium dollar – with 88 percent of their
medical expenses covered – while workers in Iowa, Mississippi
and Montana got the least value for their money.

According to Gabel, the major reason for the lesser
generosity in rural states is that traditional indemnity, or
“fee-for-service,” plans often have a strong presence there.
Overall, the study found, the average adjusted premium for
indemnity plans was about 25 percent higher compared with
health maintenance organizations (HMOs).

This finding, Gabel said, highlights the fact that the
often-criticized, cost-cutting HMO plans have some “very good”
aspects — in this case, offering employees more coverage for
their premium dollar.

Gabel and his colleagues based their findings on data from
several national surveys, including a 2002 federal government
survey of roughly 30,000 U.S. business sites.

SOURCE: Health Affairs, May/June 2006.