Over at Reason, Peter Suderman laments the fact that the new rules requiring insurers to cover individuals to their 26th birthday would increase premiums by just under 1%. “Prices determine quality of service, mandates drive prices up, and regulations make implementation more difficult; none of this is terribly shocking or controversial. Yet supporters of the Affordable Care Act have largely dismissed these concerns as trivialities,” Suderman notes:

No matter what, though, the point is that the state’s regulations made the cost of business more costly and thus drove prices up. Naturally, no one wants to pay for these increases. But someone has to.

Those in government who want to regulate insurers and impose mandates on their products seem largely uninterested in dealing with these trade-offs, preferring instead to layer endless rules and regulations on top of each other in hopes that eventually a working system will emerge. That’s not likely to happen. They might not worry much about the trade-offs and costs of their policies, but it increasingly appears that the rest of us will have to.

It’s certainly true that forcing insurance companies to accept new individuals or cover more services will increase health care premiums (since the new individuals will be more prone to use the new services). But that’s only bad if we assume that allowing young people to go uninsured or asking less of insurers will lower premiums. And so far, it has not.

In the post reform environment any increase in premiums will be blamed on health care reform, but reformers should remember that while adding sick people to health care pools will increase costs for the first 10 years (again, more people will use more services). The coverage expansion is an investment to lowering costs over the next 20. The young people’s provision is a perfect example. Sure, it kind of sucks that policy holders now have to pay a tiny 1% more in premiums in the short term. But it sucks a lot less than having to pay thousands of dollars out of pocket to treat an unexpected health emergency if you’re uninsured (or to pass those costs on to the insured) or to let a condition go undiagnosed and spend thousands of premium dollars treating it once it becomes a chronic problem.

Also, as my friend Lester Feder of GWU and RWJF’s Health Reform GPS pointed out to me, “spending a little bit more in premiums up front will save families loads if their child gets sick. It will also save others on money we would have spent on their uncompensated care. This minimal increase in one area of health spending will reduce the amount spent in other places—for many, this represents net savings.” In other words, “we don’t pay more to pay more—we pay more to get a system with fewer land mines in it.”

The mandates that increase costs in the short term get everyone into the health care system and (hopefully) lower costs in the long term. In that regard, the policy makers who are unconcerned about rising costs aren’t the ones implementing the mandates, as Suderman suggests. I blame the generations of leaders who have avoided requiring everyone to enter the system and have allowed costs to skyrocket out of control.

Kathleen Sebelius has written a letter to House Speaker Nancy Pelosi (D-CA), Rep. John Boehner (R-OH), Sen. Harry Reid (D-NV) and Sen. Mitch McConnell (R-KY) touting the administration’s success in implementing the early provisions of the health reform law ahead of schedule. Indeed, just yesterday the Department of Health and Human Services released fairly broad interim rules allowing children to stay on their parents’ health insurance plans until age 26, sent applications to the 30 states that have decided to form their own temporary high risk insurance pools, and has unveiled the reinsurance program for early retirees. Last month, the IRS also “released guidance and began delivering post cards to the estimated four million small business and tax exempt organizations” who may qualify for the credit.

In the near term, the calender looks something like this:

- June 1: HHS will receive uniform definitions from the NAIC about medical loss ratio definitions

- June 1: The early retiree reinsurance program will begin.

- June 15: Seniors will receive $250 rebate towards the Medicare Part D doughnut hole.

- July 1: High-risk insurance pools are set to begin

- September 23: Insurers can’t deny coverage to children because of pre-existing conditions

- September 2010: Secretary will promulgate regulations relating to waiver of state innovations.

The new medical loss ratio (MLR) and rate review standards are one of the few ways regulators can control insurance premiums (and insurance profits) before the exchanges become operational in 2014 and some lawmakers and consumer groups have expressed concern “that the health insurance industry is mounting an all-out effort to weaken” these consumer protection provisions.

Last week, Sen. Jay Rockefeller (D-WV) wrote Sebelius asking her to adopt tighter medical loss ratio definitions to prevent insures from shifting administrative expenses into a new accounting category adopted by the law — “activities that improve health care quality” — and artificially inflating their MLRs to comply with the new requirements. He recommended that insurers be required to “demonstrate that these expenses will improve health care quality.”

Consumer representatives at the National Association of Insurance Consumers have also put together a report advising lawmakers and the NAIC — which is tasked with sending recommendations to the Secretary — on how to structure and define provisions in a way that best serves the consumers’ interests. On rate review, the report recommends that insurers file rate increases no less than 90 days in advance of the proposed effective date and publish the filings online for public review. Affected policyholders should be allowed to request a hearing about the premiums, which could be overturned by individual insurance departments if they are deemed ‘unreasonable.’ Rates should be deemed unreasonable, the report recommends, if “the rates are likely to produce a profit from businesses in this sate that is unreasonably high to the benefits provided,” or if the they are set to replenish investment losses.

On MLR, the report agrees with Rockefeller, noting that “the new regulations should not allow insurers to classify expenses for which there is little or no evidence that the related activities ‘improve quality.’” It also notes that “insures should be prohibited form grouping their plans together to makes the low MLRs of some of their plans.” Read the full report here.