Larry Levitt has been thinking about and analyzing the Affordable Care Act and its insurance marketplaces since before the ACA was law. So I reached out to him to make sense of the new data showing premiums will rise by an astonishing 22 percent next year.

Levitt argues, convincingly, that some of the most important people to watch are those who aren’t even using the Obamacare marketplace. They’re the 7 million people who buy their own coverage outside of the federal website, perhaps directly from their preferred insurer or through a local broker.

“They’re most important because they’re paying the full premium and they are most vulnerable to rate increases,” Levitt says. “They are getting hit with the increases. If they start to drop insurance, that could lead to bigger premium increases in the future.”

Levitt and I spoke about why the premiums are going up, whether the law needs a stronger insurance mandate, and whether Obamacare enrollment will grow this year. What follows is a transcript of our discussion, lightly edited for length and clarity.

Sarah Kliff

Why are Obamacare premiums going up so much this year?

Larry Levitt

There are three reasons why premiums are going up so much. The first is that more sick people than anticipated enrolled. Insurers are just catching up to the fact that premiums weren’t covering their costs. It seems somewhat counterintuitive that this is happening four years after the insurance expansion going into effect, but it’s really only now that insurers have good data on who enrolled and how much it cost.

The second reason is the end of the reinsurance program, which helped pay for very sick enrollees. That expires at the end of this year. So they have to raise premiums to account for the end of that program.

The third reason is health care costs seem to be trending back upward. That is affecting Obamacare plans but really all insurance plans.

Sarah Kliff

So when you think about these different factors driving up Obamacare rates, does this strike you as a one-time course correction? Or that we’re at the beginning of an era with bigger Obamacare rate increases?

Larry Levitt

That is absolutely the question of the moment: Is this a one-time bump or a sign of worse things to come? And the shorter answer is we don’t know.

It seems very likely that this is a one-time bump. The upside of these big premium increases is that all those insurers that have been losing money might start to make money. I doubt many people out there would be shedding tears for insurance companies not making money, but these insurance companies have to earn a profit if they’re going to make the program work.

The risk is that premium increases beget more premium increases if some healthy people decide to drop coverage in response to the increases. In the marketplaces, that is not likely to happen because the vast majority are receiving subsidies and are cushioned.

Here is a smaller number, about 15 percent of marketplace enrollees, who are not eligible for subsidies. They will feel the full brunt of the rate hikes, although some of them might become eligible for subsidies because premiums have gotten so high.

The most important group to watch is people buying their own insurance outside of the marketplace, who are playing the full premium. They are getting hit with the increases. If they start to drop insurance, that could lead to bigger premium increases in the future.

Sarah Kliff

Why do you think that group — the people buying coverage outside the Obamacare marketplace — is the most important to watch?

Larry Levitt

They’re most important because they’re paying the full premium and they are most vulnerable to rate increases. By definition these people are generally higher-income. If they were lower-income they would go into the marketplace, although some new analysis suggests some of them might be eligible for subsidies and aren’t claiming them.

Some are sick and are going to hang on to their insurance for dear life. But the group you worry about is people who are healthy, who are buying insurance because they think it’s the right thing to do. The law requires insurers to look at who they’re covering inside the marketplace and outside the marketplace when they set premiums. So you have the same increases for everybody.

Ever since the law passed, there have been fears of a so-called death spiral, where premiums go up and healthy people leave the market. That remains highly unlikely because so many of the people are receiving a subsidy.

Sarah Kliff

But if healthy people start leaving the marketplaces, which you suggest is a possibility, does that become a death spiral? Or is there a way the markets can stabilize with losing some of the healthy people?

Larry Levitt

It’s definitely possible in some states that there could be a little spiral, if not a death spiral.

Its really matter of finding an equilibrium, where premiums cover insurers costs, allowing them to earn a little bit of profit, and enrollment is stable. We’re at that point of equilibrium in a number of states where things are working well. We’re not quite at that level of equilibrium of all states.

In those places, we may not be at the end of the premium increases that are bigger than underlying health care cost growth. But I think the likely scenario in the vast majority of states is that these big premium increases will put insurers on much better financial footing.

Sarah Kliff

The Obama administration thinks enrollment on the marketplaces will increase by about 1 million people this coming year. Do you think that’s realistic?

Larry Levitt

It feels ambitious but achievable.

There are two factors working in the administration’s favor. The first is they’ve gotten better at running the program and may have figured out ways to better target outreach efforts.

The second is the individual mandate. The penalty may still prove to be too small to get enough people to buy insurance, but I think people’s knowledge is still catching up as the penalty phases in. It was fully phased in in 2016; many people won’t know that until they file their taxes.

At some point this requires a culture shift, where there is just an expectation that you get health insurance. I think partly, because of the divisive politics around Obamacare, we haven’t yet made that the norm.

Imagine a world where the ACA passed with significant bipartisan support and there was a national effort involving politicians of all stripes and figures, and athletes, all encouraging people to get insured. That is not the world we live in. It’s more like what happened in Massachusetts.

Sarah Kliff

Do you think Obamacare’s mandate is strong enough to make the law work? Or do you think it will need to be strengthened at some point?

Larry Levitt

I think of the mandate as going hand in hand with the subsidies. It is entirely possible that both the mandate penalty and the premium subsidy are too small to make coverage affordable and convince enough people that they should buy it.

The bigger the mandate penalty, though, the more responsibility you have to provide subsidies to make sure the coverage is affordable. We’ve heard talk during the campaign from Secretary Clinton about increasing the subsidies. It wouldn’t be a popular issue to talk about increasing the mandate, but both may need to be bigger.