What Are Health Insurance Death Spirals?

Brian Blase,

Release Date
January 17, 2017



What’s happening to health insurance? It’s in a death spiral: premium hikes lead to enrollment drops lead to premium hikes …
Learn More: https://www.learnliberty.org/blog/why-chairs-are-cheap-and-epipens-are-expensive/

    1. Why Chairs Are Cheap and EpiPens Are Expensive (blog post): This article explains why another part of the healthcare system, medication, is so expensive. https://www.learnliberty.org/blog/why-chairs-are-cheap-and-epipens-are-expensive/
    2. Healthcare Premiums: The Death Spiral of Rising Prices (Learn Liberty): Brian Blase explains why premiums are rising, and which customers and companies are getting out of the insurance markets. https://www.youtube.com/watch?v=cKjNmw_Nbdk
    3. America’s Health Care System: How We Got Into This Mess and How We Can Get Out (on demand program): John Ammon, MD, Jeffrey Singer, MD, and Bob Graboyes break down the problems with America’s health care system, look at what has caused these problems, and propose what we can do to solve them. https://www.learnliberty.org/course_details/americas-health-care-system/


Bob Ewing: Let’s start with death spirals. What’s a death spiral and that doesn’t sound like it’s a good thing. What does that mean?
Brian Blase: Basically it’s a term for an unwinding of insurance markets. So if you think about the market, there’s an average premium charged, and because insurers can’t vary premiums based on health status, many people are being charged premium that is too high for them. They’re not getting a good value for the insurance, mostly healthy people. If you start with an insurance market that looks like this, and you have a premium that’s in the middle, when premiums go up, you tend to lose the healthiest part of your market.
Well, what’s that mean? It means your people that you’re left with are relatively sick. They’re sicker than average and it means premiums have to go up to account for that, and you have a smaller pool. Yeah. Who does it push out? It pushes out the people that are the most healthy. You get this sort of unwinding of the market from premium increases and diminished enrollment.
I think in many states, you’re seeing substantial evidence from the substantial premium increases. You have some premium increases that, in some states, the average premium increase is over 50%. I mean, that is several hundred dollars a month that people are being asked to pay more in premiums. They’re just not finding the coverage of enough value to purchase that.