Ezra Klein Explains Why Insurance Companies May Keep Premiums Low

I've heard a lot of concern trolling by the pundits in the media over whether insurance rates are going to rise if not if enough young and healthy people sign up for the exchanges under the Affordable Care Act over the last few months, but this is the first time I've heard anyone explain that there are some protections for the insurance companies written into the law to prevent that from happening.
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I've heard a lot of concern trolling by the pundits in the media over whether insurance rates are going to rise if not if enough young and healthy people sign up for the exchanges under the Affordable Care Act over the last few months, but this is the first time I've heard anyone explain that there are some protections for the insurance companies written into the law to prevent that from happening -- or why it might be in the best interest of the insurance companies themselves to keep rates down.

I'm no expert on health care policy, but I'm a lot more inclined to listen to the likes of Ezra Klein who discussed just that during this Sunday's Meet the Press than either host David Gregory -- who spent most of the segment either admitting that he literally knows nothing about the details of the law himself, or repeating Republican talking points about the evils of "big government" and how it's harming everyone by being too "coercive" -- or his guest, the Wall Street Journal's Dan Henninger -- who makes his living lying to the viewers on Fox every Saturday afternoon on top of cranking out op-eds for good old uncle Rupert.

I hope Klein is right about the premiums since we're stuck with this mess instead of single-payer with no fixes in sight for any problems as long as Republicans are controlling the House.

Transcript via NBC below the fold.

DAVID GREGORY: A lot of confusion over some of the latest Obamacare developments, what they actually mean. Joining me to break it down: Columnist for the Wall Street Journal, Dan Henninger, and editor of the Washington Post "Wonkblog," Ezra Klein. Different views about the wisdom of Obamacare and its future. Let me start with you, Ezra. Is Obamacare falling apart?

EZRA KLEIN: It isn't working at the moment. I don't think we know yet what the long-term consequences for the law are. So the big thing you would worry about is that, because people can't sign up now, the folks who do persist in trying to sign up are older, are sicker, because they need the insurance more, the young people you need to balance out the risk pool to keep premiums low don't sign up. And so in the second year, you have premiums going up in the insurance market.

But, look, if they get the website up and running in a much better way in the next two weeks, the next month, you've got a number of months after that until at least March for folks to sign up to get the 2015 risk pool okay. So we've seen this kind of bad launch before. The Medicare prescription drug benefit was a disaster for its first few months, and it eventually righted itself. I think it's much too early to say whether or not this will follow that trajectory, or some other.

DAVID GREGORY: Dan, a friend of mine who's in college said, "You know, I'd be willing to sign up for something the government told me I should sign up for if they could run it right. They're not running it right."

DAN HENNINGER: They're not running it right, and I think Ezra put his finger on the issue which is this website and whether they're going to be able to reconstruct it. Not merely the portal where people get into it, but from front to rear where you go into the exchanges, price the insurance policies, interact with the insurance companies and with the medical providers.

This is extraordinarily complicated. There's no way they're going to get this done in two weeks, or a month. And so if they continue to fail like that, I think that at the margins the young people, the healthy people who of course are running around using iPhones and applications successfully to redesign their own lives, they're the ones who are going to fall off Obamacare and lose faith in it. And I think to some great extent, their faith in the government's ability to deliver an entitlement like this is also being put at risk by the problem--

DAVID GREGORY: Because--

DAN HENNINGER: --with it.

DAVID GREGORY: --ultimately, I'm trying to find one or two things to kind of keep our eye on because any one of us can get lost in a level of detail that, if you don't have experience in the policy, a health care background, you just can't keep up with it. Are premiums going to go up or not. Because the insurance companies will be happy to just raise premiums if this thing doesn't work out. They were told they'd get more people signed up so it's good for their business. If not, they'll just raise premiums.

EZRA KLEIN: Well, so there may not be. This is actually one of the things that's really interesting in the next couple years. So Obamacare was begun in its first three years with a couple of protections against what we call adverse selection, right? Against too many sick people coming in and not young people coming in.

So one thing is this thing called a risk corridor. If they mis-price their insurance, right? If they price it too low for the sickness of the people they get, the government will in years one, two, and three reimburse them about half the difference. So that's a very big deal; it essentially subsidizes a bad risk pool.

The other thing is that let's say they think in 2014 this thing is just going to be a mess, right? You're going to have exactly the problem with young people we're talking about here. But by 2015, you've got a tighter individual mandate, you've got the website up and working (because I don't think anybody thinks you can't get this up in a year), well, all of a sudden insurers have to make this decision: Do they want to just keep all these sick people they got in the first year, or do they want to price it such they get the healthy people?

And it might make a ton of sense for them to keep premiums low in 2015 in order to get the healthy people because, otherwise, they've got the worst of both worlds. They've got a terrible risk pool. So I don't think it's automatic what they do, we just don't know yet.

DAVID GREGORY: You know, Dan, you and I had an exchange this week and you made the point that this president has gone way too far in his quests to use government to do good. That it's become coercive. That the idea of the mandate is the centerpiece of Obamacare. Is that kind of what's the big test of all of this?

DAN HENNINGER: I think so. I mean, the theory behind progressive or liberal politics, at least going back to F.D.R., was that they could come up with ideas to do good, like Social Security or Medicare and Medicaid. And that although it might be inefficient, that they could just make it work. The administrative state, the bureaucracies could make it work. That's been the theory.

We are seeing a test case now with Obamacare whether this grand entitlement can be made to work by the administrative bureaucracies. And if it continues to have the sorts of problems it is, I think a lot of voters for whom government is on the bubble right now, make no mistake about it, are going to start pulling back to support for this basic idea that liberals and progressives have pushed for the last 80 years.

EZRA KLEIN: I think there's a lot of truth to that. The one thing I would say is I think that sometimes we underestimate how much everybody has a stake in government being able to do these kinds of things well. So if you look at Paul Ryan's health care plan, right, that he brought out in 2009, it had exchanges. The federal government and the states had to set up exchanges. If you look at his Medicare plan, right, which is in the Republican budget, it also moves Medicare over to exchanges.

So Republicans and Democrats, liberals and conservatives, they both on some level need the government to be able to function well. And it's bad for both sides if the government can't construct these basic administrative tasks that are needed for any kind of reform, be it liberal or conservative, effectively.

DAVID GREGORY: I'd like to be able to check in with both of you as this goes on to get a reality check beyond what the politicians are saying, which I think leave a lot of people kind of in the confusion of doing arguments. So Ezra and Dan, thank you both very much for being here. I appreciate it.

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