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.
"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
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Getting rid of profits wouldn’t make costs go down – they would go up, because without profits there would no longer be the same incentive to hold down costs. Profits are the reward that firms get for figuring out what customers want. Earl Grinols, Distinguished Professor of Economics at Baylor University and author of a new book from Cambridge University Press entitled “Health Care for Us All,” argues that “profit maximization combined with competition is the only reliable way that we know to keep costs low.”
Non-profits obtain the success they do largely because of tax and regulatory advantages offered to them by the government (e.g., somewhat higher federal taxes on for-profit corporations).
So much of the debate focuses on the supposed heavy concentration in the insurance industry and the supposed greed, costs, and inefficiencies of for-profit companies. Private insurance medical insurance is neither very concentrated nor largely for-profit.
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