Lott fact-checks Obama

From Fox News:

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.

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Several studies point to how concentrated the health care insurance market is. A 2008 study by the American Medical Association shows that one or two health insurance providers dominate the market in most states, implying that the providers could be exploiting a monopoly-like situation to generate "excessive" profits.

But they leave out the fact that for most people it is their employer, not the insurance companies, that pays for any bad health outcomes. The firm does so out of the company's own pocket. The companies do what is called "self-insure" or "self-fund" their plans, and that occurs for around 55 percent of employees according to the Agency for Healthcare Research and Quality with the Department of Health and Human Services.

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.