Good news for Obamacare

Young Ezra:

In 2009, the Congressional Budget Office predicted that a medium-level “silver” plan — which covers 70 percent of a beneficiary’s expected health costs — on the California health exchange would cost $5,200 annually. More recently, a report from the consulting firm Milliman predicted it would carry a $450 monthly premium. Yesterday, we got the real numbers. And they’re lower than anyone thought.

As always, Sarah Kliff has the details. The California exchange will have 13 insurance options, and the heavy competition appears to be driving down prices. The most affordable silver-level plan is charging $276-a-month. The second-most affordable plan is charging $294. And all this is before subsidies. Someone making twice the poverty line, say, will only pay $104-a-month.

Sparer plans are even cheaper. A young person buying the cheapest “bronze”-level plan will pay $172 — and that, again, is before any subsidies.

California is a particularly important test for Obamacare. It’s not just the largest state in the nation. It’s also one of the states most committed to implementing Obamacare effectively. Under Gov. Arnold Schwarzenegger — remember how that really happened? — California was the first state to begin building its insurance exchanges. The state’s outreach efforts are unparalleled. Its insurance regulators are working hard to bring in good plans and make sure they’re playing fair. If California can’t make the law work, perhaps no one can. But if California can make the law work, it shows that others can, too.

And perhaps others will. We’re beginning to see competition drive down proposed rates in some exchanges around the country. Remember Maryland, where CareFirst grabbed headlines with a shocking 25 percent proposed increase in rates? More plans have streamed in with lower bids. Kaiser Permanente, for instance, is only increasing its rates next year by 4.3 percent — a modest increase that will make CareFirst’s proposal almost impossible to sustain. My guess is when the exchange actually opens in October, CareFirst will have dropped its price substantially. If they don’t, then Kaiser and others will grab all the market share.

The way this competition can drive down rates is already evident in Oregon. There, one insurer came in with monthly premium costs in the $169 range, while other insurers asked to charge more than $400. But then, seeing  what their competitors were charging, two insurers came back to the state’s regulators and asked if they could refile at lower rates. Otherwise, they wouldn’t be competitive in the exchange. The Obama administration was ecstatic to see this: It’s exactly what they’re hoping will happen across the country.

Of course, California and Oregon are managing Obamacare particularly well. But the state-by-state nature of the Affordable Care Act creates really unusual political dynamics around how the law is perceived in its first year.