Starting in 2017, there has been talk of the possibility of a death spiral in the individual Patient Protection and Affordable Care Act (ACA) marketplace. Talk of an ACA death spiral occurred because two of the death spiral symptoms—high rate increases and falling enrollment—were observed in 2017 and 2018.
In health insurance, death spirals occur when premium rates rise enough to drive out the healthiest enrollees, leaving the risk pool sicker and more expensive. This, in turn, necessitates that insurers increase premium rates, which then drives out the next-healthiest enrollees and reduces new enrollment. This cycle continues until the risk pool contains only the sickest and most expensive enrollees, with premiums unaffordable for most. Death spirals start slowly and then accelerate, with the primary symptoms being higher than usual rate increases, falling enrollment, and increasing morbidity. In this paper, Milliman’s Erik Huth and Peter Fielek reviewed ACA rate changes, enrollment, and morbidity to determine the likelihood of a death spiral occurring in the ACA marketplace.