Obama’s Gov’t ‘Non-Profit’ Insurance ‘Competition’ Idea is Uninformed

September 23, 2009 | Filed Under Anti-Americanism, Barack Obama, Business, Capitalism, Congress, Democrats/Leftists, Economy/Finances, Free Trade, Government, Corruption, Liberals, President, Socialism, Society/Culture, Warner Todd Huston |

-By Warner Todd Huston

In his desire to slander capitalism and impugn the integrity of all insurance companies in order to play up his “public option” idea, President Obama’s main claim has been that those evil insurance companies need “competition” from a government sponsored plan. This purported competition is supposed to “keep them honest.”

Obama presents this idea as if there currently isn’t any non-profit health insurance group keeping those for-profits honest. He acts as if he has some sort of new idea, one that currently doesn’t exist. But the truth is many states already have non-profit health groups. On top of that one of these non-profits is usually one of the largest insurance groups around.

That group would be Blue Cross and Blue Shield. John Lott, economist and author of “Freedomnomics,” gives us some of the facts:

Yet, in 29 of the 43 states that data are available for… the dominant company in the “full” insurance market is a non-profit company. In state after state, Blue Cross and Blue Shield hold the largest market share. On average, the largest non-profit hold over half of the “full” market share in those 29 states. Why add another non-profit operation to the mix?

Why, indeed?

Lott also points out that many of Obama’s other claims about insurance companies are incorrect.

Lott first revisits Obama’s claims to place the discussion in context.

“Consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company. Without competition, the price of insurance goes up and the quality goes down…an additional step we can take to keep insurance companies honest is by making a not-for-profit public option available in the insurance exchange…” — President Barack Obama, September 9

Two claims are made all the time in the health care debate: 1) that there is little competition among those providing health insurance and 2) that it is important to take the profit motive out of providing health insurance. Both are myths. It turns out that claims about too little competition are based on a misinterpretation of the data and that non-profit insurers are so abundant that the largest insurer in virtually every state is a non-profit.

But is it true? Are these situations in states where there supposedly isn’t much insurance competition real? Apparently not.

Take Maine, Senator Snowe’s state, as an example. There, the two largest insurance companies appear to control 88 percent of the market. And Well Point Inc. makes up most of that, with 78 percent. But what isn’t made clear is that these numbers only deal with privately insured patients who are insured by insurance companies. Slightly over half of the privately insured in Maine (52.1 percent) get their insurance through their employers who “self-insure.” These companies merely hire other companies to handle the paper work. Well Point Inc. thus really provides primary or “full” insurance to 78 percent of the market not covered by self-insurers. Doing the math gives 78 percent x (1 - 52.1%) = 37.1 percent of the total market in Maine. The second largest insurance company has only 4.8 percent of the total market.

For Alabama, instead of the “almost 90% is controlled by just one company,” as the president claims, the correct number is 36 percent. The second largest company has just 2.1 percent of the market.

Not only is 37 percent a lot less concentrated than 78 percent, but the 52.1 percent covered by self-insurers is extremely competitive. Thousands of employers in Maine are self-insurers, and they compete for workers not only on the basis of the salary that they pay, but also on the benefits that they offer.

It turns out that Obama’s claim just isn’t true. His claim that only a few companies insure nearly everyone and that there is no competition because of these near monopolies is a myth.

Obama likes to talk about debunking myths. I’d like to see him start with his own dearly held myths.
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Warner Todd Huston is a Chicago based freelance writer, has been writing opinion editorials and social criticism since early 2001 and is featured on many websites such as NewsBusters.org, RightWingNews.com, CanadaFreePress.com, StoptheACLU.com, TheRealityCheck.org, RedState.com, Human Events Magazine, AmericanDailyReview.com, and the New Media Journal, among many, many others. Additionally, he has been a frequent guest on talk-radio programs to discuss his opinion editorials and current events and is currently the co-host of “Life, Liberty, and the Pursuit of Conservatism” heard on BlogTalkRadio. Warner is also the editor of the Cook County Page for RedCounty.com.

He has also written for several history magazines and appears in the new book “Americans on Politics, Policy and Pop Culture” which can be purchased on amazon.com. He is also the owner and operator of PubliusForum.com. Feel free to contact him with any comments or questions : EMAIL Warner Todd Huston

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