Obamacare death spiral looks unlikely: study WASHINGTON (Reuters) - A threat to America's health insurance overhaul has been that young people would not buy coverage in new marketplaces, possibly pushing the program into a disastrous spiral of falling enrollment and rising premiums. But this worst-case scenario is looking more far-fetched, according to a study by the Kaiser Family Foundation, which sees just slight increases in premiums in 2015 even though enrollment of younger people so far is well below the Obama administration's target. Preliminary figures suggest roughly a quarter of Americans signing up to buy insurance under the policy have been between the ages of 18 and 34, below the administration's target of roughly 40 percent. Their money is crucial for the program's success because it helps compensate for the higher costs of insuring older Americans, who tend to have more health problems. "It is nowhere near what is sometimes referred to as a death spiral," Larry Levitt, a health economist at the foundation, told reporters following the report's release on Tuesday. The sweeping 2010 healthcare overhaul, known as "Obamacare" and aimed at expanding coverage by private insurers, is the signature domestic policy of President Barack Obama. The policy, which created online insurance exchanges across the country, limits how much insurers can charge older, sicker Americans compared with younger, healthier ones. This helps make insurance more affordable for older Americans who most need it, but it requires the young to pay more to subsidize the old. The hitch is that if fewer young people buy coverage for 2014 than private insurers currently plan, firms could raise premiums the next year to protect their profits. A big enough rate hike could lead to even fewer young people signing up in 2015, and the cycle could then repeat itself in subsequent years. Under this death spiral scenario, the program would fall well short of expectations that it expand coverage to 25 million Americans by 2016, while the cost of subsidizing each insurance plan would be much higher than planned. "You would basically have a failed program," said Josh Gordon, policy director at The Concord Coalition, a think tank specializing in budget issues. But Gordon and other policy experts have long expressed doubts over how plausible such a scenario could be, even as the Obama administration botched the roll-out of the exchanges in October with a dysfunctional website. According to the Kaiser report, if 25 percent of enrollees are age 18-34 next year, insurers would have to raise premiums by just 2.4 percent in 2015 to cover the shortfall. Insurers typically set their premiums to achieve a 3-4 percent profit margin, so the current trend in enrollment, if it extended throughout 2014, "could reduce the profit margin of insurers substantially" that year, according to the report. But insurers would only have to raise premiums by a percentage point or two to protect their profits. Getting enrollment by younger people to 40 percent would fully cover the cost of making insurance more affordable for older Americans, Levitt and his coauthors said. Their number crunching doesn't take into account other factors that could also help ward off a death spiral. For one, the government heavily subsidies policies for many Americans, largely shielding them from premium hikes. Also, because selling insurance to the young is more lucrative and people tend not to change policies very often, insurers are motivated to keep rates low to attract new business. "A death spiral is highly unlikely," Levitt said. Reporting by Jason Lange; Editing by Vicki Allen