Insurer Participation in Rural Health Insurance Marketplaces: Are Some Markets Intrinsically More Competitive Than Others?


The Patient Protection and Affordable Care Act of 2010 established Health Insurance Marketplaces (HIMs) as a mechanism to improve the functioning of existing individual insurance markets. However, to be successful, this model requires the presence of at least a handful of insurers from which beneficiaries in each local market can choose. Over the first five years of HIMs, rural counties have often struggled to attract sufficient numbers of HIM insurers. In this project, county-level data were combined from HIM plan availability files, Medicare Advantage (MA) availability and enrollment files, and Federal Employees Health Benefits Program (FEHBP) availability and enrollment files. We calculated the Herfindahl Index, which is a measure of competition in a given market, for MA and FEHBP markets for each county in 2013-16.

We found that, within a given population density category, the number of HIM insurers was positively correlated with the prior level of FEHBP market competition in a county. Note, also, that market competition was generally higher as population density increased. In 2017, the pattern continued to hold, with those counties that still attracted several insurers (rather than just one or two) averaging the lowest prior-year FEHBP Herfindahl index. We found that many of the population measures were in fact significant in their own right, including population density, total population, primary care providers per capita, and rural status of the county. Furthermore, even when controlling for these measures, prior FEHBP market concentration (low competition) was a significant predictor of low insurer participation in HIMs. In addition, from 2014 to 2017, the magnitude of the effect increased. The FEHBP Herfindahl Index is a proxy for a multitude of historical factors that may relate to the presence and type of hospital systems, the policy environment at the state level, the entrenchment of certain insurers who were early entrants to the private market, the payer mix, and even the specific geography in terms of terrain and infrastructure. Future research is needed to better understand the underlying issues that are driving these findings as well as their potential to be addressed through changes in state or federal policy.

RUPRI Center for Rural Health Policy Analysis
Abigail Barker, Timothy McBride, Keith Mueller