Report challenges claim that marketplaces in 'death spiral'

White House
A new report from the White House Council of Economic Advisers argues ACA marketplace premium increases this year are a "one-time correction."

Even though premiums have risen this year, the Affordable Care Act’s individual marketplaces aren't facing a "death spiral" as some have claimed, according to a newly released government report.

The report (PDF), from the White House Council of Economic Advisers, argued that continued growth in marketplace enrollment in 2017 shows that “premium increases are not having substantial adverse effects on either individual market enrollment or the risk pool.”

Indeed, the latest enrollment report from the Centers for Medicare & Medicaid Services estimates that enrollment in the federal and state-based marketplaces reached 11.5 million as of Dec. 24, an increase of 286,000 compared to the same time last year.

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Premiums for ACA benchmark silver plans rose an average of 22% in 2017, up considerably from the 7.5% average hike in 2016. But the White House report said those increases reflect an “ordinary process” of insurers adjusting to a new market, including initial plan underpricing. The data also showed that claims costs have not risen rapidly in the individual market, the report said.

Further, business practice changes implemented by insurers and improvements in federal regulations should be enough to return premiums to a sustainable level, implying that these year’s hikes were a “one-time correction,” the report said.

But for some insurers, including Aetna and UnitedHealth, the business case for remaining in the exchanges was not sufficient, leading them to pull out or at least drastically draw down their participation for this year. Those exits, coupled with rising premiums, have led prominent Republicans to call for a rapid repeal of the ACA. The law, House Speaker Paul Ryan said recently, "is in what the actuaries call a death spiral."

The Senate is expected to vote today on a budget resolution that would clear the way for a fast-track repeal of major ACA provisions. President-elect Donald Trump has pushed for a swift repeal of the law, but in contrast to GOP congressional leaders, he also wants to rapidly replace it.