Study Says ‘Death Spiral’ From Low Enrollment in Exchanges Unlikely

Concerns that low enrollment by young, healthy individuals in the Affordable Care Act's health insurance exchanges will cause significant premium increases are overblown, according to a Kaiser Family Foundation study released Tuesday, Reuters reports (Lange, Reuters, 12/17).

Background

HHS has said it hopes that at least 2.7 million young, healthy adults -- or about 39% of the seven million targeted for total enrollment -- sign up for coverage to help offset higher costs incurred by older, sicker individuals (California Healthline, 12/5).

Insurers are worried that low enrollment among young, healthy individuals will drive up costs and cut into profits.

In turn, companies could raise premiums the next year, creating a "death spiral" in which fewer and fewer individuals purchase coverage (Reuters, 12/17).

Details of the Study

According to the study, even if only half as many young, healthy adults enroll through the exchanges as older, sicker residents -- which the study calls the "worst-case scenario" -- the younger enrollees still would make up about 25% of overall individual enrollments. In such a case, insurers likely still would bring in a small profit.

Although insurers would slightly increase premiums the next year to increase their profits, the small increase "would be well below the level that would trigger a 'death spiral,'" the study concluded (Adams, CQ HealthBeat, 12/17).

Further, KFF analysts said they expect enrollment among young, healthy adults to increase as the end of the open enrollment period nears.

"Premiums are not as sensitive to the mix of enrollment as fears about a 'death spiral' suggest, particularly with respect to age," the authors wrote, adding that it is more important for insurers to recruit a balanced mix of healthy and sick people of all ages (Hancock, "Capsules," Kaiser Health News, 12/17).

The study's results do not consider other factors that might prevent a death spiral, such as federal exchange subsidies that help protect consumers against rate hikes, according to Reuters.

In addition, insurers might keep premiums low to attract young, healthy individuals, who are more lucrative to their businesses (Reuters, 12/17).