But the draft proposal released by the Senate does little to address the fundamental reasons insurers shun rural markets. The companies, particularly the large for-profit insurers, have always been reluctant to offer coverage in sparsely populated areas because there are simply not enough potential customers to make it worth their while. If too many of those customers need expensive medical care, there are too few healthy customers to spread those costs around.
The insurers also have a tougher time developing networks and negotiating low prices from hospitals and doctors because there are so few choices. When there’s only one hospital in town, it’s hard to negotiate a good price for medical services. And once a hospital and insurer have struck a deal, it can be harder for new insurers to enter the market on favorable terms, since there aren’t competing hospitals to use for negotiating leverage.
“These areas are not going to be solved by a market, unless there is some magic internet substitute for providers that pops up some day,” said Jon Kingsdale, an associate professor at the Boston University School of Public Health.
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“It’s not like, prior to the Affordable Care Act, we had these really highly functioning insurance markets that all of the sudden the Affordable Care Act broke,” said Craig Garthwaite, an associate professor at the Kellogg School of Management, who studies health care markets. Mr. Garthwaite said rural Americans live with less choice in many businesses and services, not just health insurers. Most rural areas have only one grocery store and school, and only a few restaurants, too. “We’ve always had trouble in these markets,” he said.
If the Senate bill becomes law, the problem could become worse. The legislation cuts back on the federal subsidies that many low- and moderate-income Americans use to buy health insurance, with sharper cutbacks for Americans nearing Medicare eligibility.
