Rural Residents See Higher Premiums, More ARPA Premium Subsidies

The premium subsidies under the American Rescue Plan Act (ARPA) provide significant financial assistance to individuals living in rural areas who were more likely to see higher health insurance premiums, an Urban Institute report found.

The tax credits under ARPA help lower the cost of health insurance for individuals and families on the Affordable Care Act (ACA) marketplace. The legislation also expanded premium assistance to individuals and families with incomes above 400 percent of the federal poverty level (FPL).

After analyzing average premiums in urban and rural areas across all 50 states in 2019 and 2022, the report found that rural areas tend to see the highest benchmark premiums. Therefore, rural residents received the greatest financial assistance through the ARPA subsidies.

The federal government establishes premium subsidy amounts by determining the difference between the benchmark premium and a household’s income percentage. The higher the benchmark premium is, the bigger the premium subsidy.

The average 2022 US weighted benchmark premiums in urban areas were about 10 percent lower than the benchmarks in rural areas, the report found. The difference dropped to five percent when unweighted.

The average benchmark premium in rural areas was higher than urban area premiums in 34 states. Nine states are classified as either entirely urban or rural, meaning only eight states have urban benchmark premiums that exceed the rural premiums.

Among the states that had higher rural premiums, 18 of them had average rural premiums that were more than 10 percent higher than the average urban premiums, according to the report. In 12 states, the rural premiums were more than 20 percent higher than urban ones.

For example, California’s average rural benchmark premium ($519 per month) was 26 percent higher than the urban benchmark premium ($413 per month). Arizona’s average rural benchmark premium was $500 per month, compared to $379 for the urban benchmark premium.

There was a 58 percent difference between benchmark premiums in Illinois, with rural premiums at $590 per month and urban ones at $373 per month.

Due to these high benchmark premiums, rural residents were eligible for more substantial ARPA subsidies than urban residents.

For example, subsidies in northern California, which is classified as a rural area, were $526 per month for a 40-year-old whose income is 150 percent FPL. For the same individual in Los Angeles, an urban area, the subsidies were $327 per month.

ARPA premium subsidies are higher for those with lower incomes, but individuals in rural areas with incomes at 300 percent FPL still received more substantial subsidies than urban residents. Northern California residents received subsidies of $333 per month, while Los Angeles residents received $134 per month.

There were similar premium differences in Florida, the report found. An individual in the state’s rural region whose income is 150 percent FPL received $772 per month in subsidies compared to a Miami resident with a similar income who received $445 per month.

At 300 percent FPL, the subsidies were $579 per month in rural areas and $252 per month in Miami, an urban area. Since ARPA expanded tax credit eligibility to individuals with incomes above 400 percent FPL, rural Florida residents with incomes at 450 percent FPL received $361 per month. In contrast, Miami residents received $34 per month.

“These data demonstrate that the differences in benchmark premiums in rural versus urban areas—or in high- versus low-premium states—can result in much greater subsidies at the individual level,” the report stated.

In addition, the ARPA subsidies provided more financial assistance to low-income individuals than the original ACA subsidies. The ARPA tax credits are set to expire at the end of 2022 if federal policymakers do not extend them.

Without subsidy expansion, rural Americans and those in high-premium states may lose access to affordable healthcare coverage, the report said.

Urban Institute also reported that young adults, Black individuals, and low-income people would experience significant coverage losses without ARPA subsidy expansion, with the uninsured population potentially increasing by 3 million.

In addition, state-based marketplace enrollees will likely see premium increases if federal leaders do not expand the ARPA subsidies past 2022.