Virginians who live in rural areas are likely to be particularly hard hit if repeal and replacement of the Affordable Care Act (ACA) moves forward. The recently proposed House replacement plan, the American Health Care Act (AHCA), would drastically cut federal Medicaid support for Virginia and subsidies for low-income individuals to purchase Marketplace insurance. Taken together, these two types of cuts could be devastating to rural communities that are struggling with simultaneous challenges like depopulation, relatively high unemployment, and low wages, – all of which are made worse by a lack of health coverage.
Overall, people in rural counties tend to have poorer health and are more likely to be covered by Medicaid. Furthermore, these communities have been hit hard by the ongoing opioid crisis in the state, which is only intensified by relatively high unemployment rates in these localities. These structural and demographic challenges have made the ACA critically important to rural localities, which have been among the biggest beneficiaries from the ACA. Most of the counties in rural Southwest and Southside Virginia have seen large decreases in the share of uninsured residents since the ACA was implemented.
In the face of higher health care costs in rural localities, the subsidies for low-income residents allowing them to purchase Marketplace plans have become critical lifelines to make coverage affordable. The AHCA, if implemented, would sharply reduce those subsidies because they would no longer be calculated based on geographic variation. Under the current health law, premium tax credits are adjusted based on a benchmark insurance plan offered in each area. If an area’s benchmark plan is expensive, low-income residents receive a larger credit to subsidize their insurance costs. Due to lower population density, rural localities tend to have fewer providers, access to care, and as a result, higher costs. Many rural counties throughout the state are now down to just one Marketplace insurer.
Looking at two very different localities, one can get a sense of the difference in cost. Under the AHCA, a 60 year old couple making $40,000 a year in rural Giles County would see an average reduction in tax credits of about $11,020. Meanwhile, a similar couple living in the City of Richmond would see a smaller, but still significant, cut of $6,520. Across the board, low-income residents in rural counties would see some of the steepest increases in what they pay for care. And on top of that, if Virginia received a waiver to allow insurance companies to charge more for pre-existing conditions and cut back on essential benefits, as is allowed under the current version of the AHCA, the same couple could have much higher bills and larger out-of-pocket costs in both rural and urban areas.
To make matters worse, people in rural localities are less likely to have access to health coverage through their jobs. For some occupations typically found in rural localities, such as farming and ranching, workers are more than twice as likely to have insurance through individual markets compared to other occupations.
Aside from subsidy reductions, Medicaid cutbacks in the AHCA is the other major impact that would disproportionately harm rural communities. The Department of Medical Assistance Services (DMAS) estimates that under the AHCA, Virginia would lose $708 million between 2020 and 2026 in federal support for Medicaid.
Medicaid has historically provided coverage for a larger share of individuals living in rural counties compared to cities. Under the current health law, this trend has only increased. Around 44 percent of children in non-metro areas in Virginia are covered by Medicaid, while only 25 percent are covered in the state’s metro areas. Only Hawaii has a larger difference between non-metro and metro Medicaid coverage rates for children. Similarly, adults in Virginia’s non-metro areas are more than twice as likely to be covered by Medicaid as those in metro areas.
Virginia will most likely offset Medicaid cuts from the AHCA by rolling back provider payments, eliminating certain services, or slashing eligibility for coverage, as there is unlikely to be the political will to increase taxes to make up for lost federal funds. And because rural communities in Virginia tend to have higher shares of their population enrolled in Medicaid, any cuts to the program are going to be felt more severely in these communities.
Considering all of the additional challenges that rural communities face – poorer health conditions, more pre-existing conditions, heavier reliance on Marketplace subsidies and Medicaid, and a host of socio-economic issues – these communities have both been among the biggest beneficiaries from the ACA and have the most at stake in the new AHCA.
With virtually no upside for the vast majority of rural residents, the AHCA is a dangerous deal for some of our state’s most challenged communities.
–Chad Stewart, Research Assistant