Employer spending on health benefits, the type of benefits offered to employees and the utilization of healthcare services vary dramatically between urban and rural employers, according to a new study by benefits consultant William M. Mercer.
Mercer polled 521 firms in small towns, defined as regions with fewer than 100,000 people, and 3,204 firms in urban areas, defined as regions with a population of more than 100,000.
It concluded that small-town employers spend significantly less on health benefits for their workers than their big-city counterparts. Yet, employees in rural areas have easier access to physicians of their choice and alternative medicine than workers in urban markets.
Rural employers spent $3,415 per employee on healthcare benefits in 1998, compared with $3,906 for urban employers. Far more rural employees were enrolled in indemnity plans (20%) than urban employees (12%), and in PPOs (51%) than urban employees (38%).
Just 19% of the small-town employers polled provided HMO coverage, compared with 37% of urban firms. Blaine Bos, the Mercer principal who supervised the study, said HMOs have less market penetration in rural areas. "There's little need for a gatekeeper in rural communities, because they don't have access to many specialists," he said.
Rural employers were more likely to pass larger out-of-pocket costs to their employees and offer fewer nonmedical benefits. The mean deductible for rural employees with indemnity family coverage is $1,000, compared with $500 for urban workers. Only 51% of rural employers offered dental coverage, compared with 61% of urban firms.
And employees in large rural firms (33%) were also less likely to receive retirement healthcare benefits than employees in large urban firms (37%).
"That was a curious and disheartening conclusion, because we figured that small-town employees would pay less out-of-pocket because they earn less," Bos said.
However, rural employees were also much more likely to receive alternative care and disease management. Among rural firms, 67% offered some form of alternative medicine coverage, compared with 51% of urban firms. As for disease management, 48% of small-town employers with more than 500 workers offered some form of program, compared with 39% of urban employers with more than 500 workers.
Mercer concluded the kinds of benefits rural Americans receive may also generate unnecessary care. Hospital admissions are significantly higher in small towns-178.5 per 1,000 residents, compared with 142.1 in urban areas. Surgical rates are also much higher in small towns-57.6 per 1,000 residents, compared with 44.7 in urban areas.
"Overutilization can be a problem in a small city that has a full-service hospital without the population density to support (it)," the study's researchers noted.