About: Death spiral (insurance)

Death spiral is a condition where the structure of insurance plans leads to premiums rapidly increasing as a result of changes in the covered population. It is the result of adverse selection in insurance policies in which lower risk policy holders choose to change policies or be uninsured. The result is that costs supposedly covered by insurance are pushed back onto the insured. The term is found in the academic literature at least as early as Cutler and Zeckhauser's 1998 paper, "Adverse Selection in Health Insurance", which refers explicitly to an "adverse selection death spiral".