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Rural-Urban Health Insurance Cost Disparity Rises

By Adam Belz, The Des Moines Register

July 16, 2011

A disparity is growing between rural and urban Iowa in the cost, quality and availability of employer-based health insurance.

Rural workers must devote a higher percentage of their income to health insurance than urban workers even as they pay higher - and growing - deductibles, the annual Iowa Employer Benefits Study shows. Rural employers are less likely than urban firms to offer health insurance at all.

The study, conducted by David P. Lind & Associates in Clive and published by the University of Iowa College of Public Health, also projects alarming increases in health care premiums and deductibles over the next decade for Iowa's rural and urban workers.

Health insurance premiums for a single rural worker are about $10 more per month, on average, than coverage for a single urban worker. While family coverage is slightly less expensive in rural Iowa than in urban Iowa, far higher out-of-pocket health care expenses for rural employees quickly cancel the advantage.

"When you see what they're purchasing, they're purchasing greatly reduced benefits - higher deductible plans, higher co-pays," David Lind said in a meeting with The Des Moines Register's editorial board last week. "The rural employee is now being asked, on average, to pay almost $1,500 in deductibles for single coverage, versus their urban counterparts, at $1,100."

The disparity in family deductibles is even greater. The average obligation for rural workers is $3,282 while the average for urban workers is $2,255.

It's not clear why rural health costs are outpacing urban costs, said James Merchant, director of the Healthier Workforce Center for Excellence at the U of I College of Public Health. Some theories are the aging population in rural counties and the slightly higher prevalence of obesity, he said, but those factors aren't conclusive.

The results of the study, which does not deal with unemployed Iowans, also show skyrocketing costs for health insurance on the horizon, both for rural and urban Iowa.

Based on the growth of premiums over the past five years, Lind projects the average rural worker - who spends 10 percent of his or her income on health care premiums - will have to spend 22 percent for health insurance by 2020.

Add to that the 40 percent of their income their employer will have to spend on their health insurance, and the price of premiums for the average rural worker will equal more than 60 percent of their income by 2020.

Rising costs shouldered by employers are a problem for workers, too, Lind said, because they suppress what employers pay in wages.

"This, to us, is the true definition of unsustainable," Lind said. "This is disturbing to everyone - employees, employers and certainly the state."

By 2010, 89 percent of urban employers offered health insurance, compared with 76 percent of rural employers. Only 14 percent of rural firms that employ part-time workers offer them health insurance, compared with 27 percent of urban employers.

The state's smallest employers - those with fewer than 10 on the payroll - were the least likely to offer health insurance. And premiums have increased the most for employers with fewer than 50 on the payroll over the past six years, the survey showed.

"Smaller employers are really hurting," Merchant said.

Often, small employers have tried to keep premiums down by restructuring plans, resulting in higher out-of-pocket costs for workers, Lind and Merchant said.

The study considered 79 of Iowa's 99 counties rural, with counties around Davenport, Iowa City, Cedar Rapids, Waterloo, Des Moines, Council Bluffs and Sioux City considered urban. Workers were considered rural for the study's purposes if their employer is located in one of the 79 rural counties.

The Real Iowans Health Survey, whose results were published together with Lind's study, shows urban residents are more likely to say they are in good health than rural residents. Rural residents were more likely to be obese, and less likely to always wear a seat belt.

But rural residents were also slightly less likely to smoke and more likely to get a good night's sleep, have a primary care doctor, visit their doctor within the past 12 months, and get flu shots.

"Rural Iowans have good access to primary care," Merchant said. "And they use primary care."

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