In an article published on May 22, “Report blames 2 insurers for rise in health rates,” the Chronicle reported on a study by Health Care for America Now that blamed two insurance carriers for increases in health insurance rates. A closer look at the facts reveals why this conclusion is both flawed and misleading.

The report's findings are based on a perceived lack of competition in the Texas health insurance market. Information from the Texas Department of Insurance (TDI) and the United States General Accountability Office (GAO) contradicts that premise.

Additionally, representatives from the Federal Trade Commission have previously questioned the validity of methodology similar to that used in the report to measure market concentration.

According to data from TDI, approximately 70 companies were registered to offer coverage in Texas among the midsize and large employer market in 2007, with 40 carriers registered to provide individual policies in 2008. Those are hardly markets without competition.

The GAO reports that, nationally, the median number of licensed carriers per state in the small employer market is 27. Texas has 46. Nationally, the median market share of the largest carrier was 47 percent. Texas' largest small group carrier has 27 percent — further demonstration of the highly competitive nature of the market.

According to the GAO, the five largest carriers in the small group market in each state represented 75 percent of the market in 35 of 39 states, and 90 percent in 23 of those states. Texas' five largest small group carriers represented only 68 percent of the market.

These numbers make clear that Texas has one of the more competitive health insurance markets in the country, which means health plans must operate efficiently, meet customer expectations and price their products competitively.

While rising health care premiums are a concern for everyone, it is not surprising that many fail to link the cost of health coverage to rising medical spending.

In economic terms, the fact of rising health insurance premiums is a lagging indicator, not a leading indicator — an effect rather than a cause. Among the varying theories of why premiums are increasing, one fact remains irrefutable — rising medical costs are a primary driver of the cost of health coverage.

A recent study by RAND Health offers confirmation. This report found that 89 percent of premium growth over a five-year period was due to increased medical costs, while only 11 percent was attributable to health plan administrative costs. According to the Centers for Medicare and Medicaid Services, health plan administrative costs and profits comprised only 4.5 percent of the nation's total health care spending ($2.1 trillion) in 2006.

Data from the U.S. Agency for Healthcare Research and Quality (AHRQ) also illustrates how the rapid rise in medical costs is driving up the cost of coverage. According to the AHRQ data, doctors and other providers, not insurance companies, increased their charges for five common conditions between 69 and 85 percent from 2000 to 2005. Of those five conditions, treatment costs for allergic reactions increased by 69 percent, heart attack by 71 percent, a broken arm by 75 percent, kidney stones by 78 percent and congestive heart failure by 85 percent. In contrast, the national inflation rate for the same period was 16 percent.

Clearly, the solution to affordable coverage lies in our ability to manage costs while increasing access to quality care. Researchers from the Dartmouth Institute for Health Policy and Clinical Health estimate that as much as one-third of health care spending is attributable to medical errors, duplicative procedures, and unnecessary treatments and prescriptions. Perhaps the Dartmouth findings provide a clue, rather than a smokescreen, to the path toward affordable health care for all.

Wolfe is executive director of the Texas Association of Health Plans.