If you believe politicians, health insurers are having a banner year.

President Obama says insurers enjoy record earnings. Senator Jay Rockefeller criticizes a 400 percent increase in profit in recent years, and at least two congressional committees are investigating the big companies' business practices. Senate Majority Leader Harry Reid says insurers are simply greedy.

A look at insurers' earnings this year shows a different story, though. Companies are being hit by rising medical costs and are losing customers as people are laid off. As a result, profit margins for the best-performing insurers—UnitedHealth Group Inc., Wellpoint Inc., and Aetna Inc.—are around 4 percent. Insurance companies are far less profitable than other health care businesses. Drugmaker Merck & Co. has a 34 percent profit margin, while Biotech company Amgen Inc. has a 33 percent margin.

The financial picture at Aetna, an industry leader, is telling. While revenue rose 12 percent, to $26 billion, in the first nine months of the year, that wasn't enough to keep up with costs, which rose 14 percent, to $24.3 billion. The largest source of that increase in expenses comes from health care costs, which surged 16 percent for the year through September 30, thanks to swine flu and increased use of Cobra, the federal program that let's people keep their insurance after they have lost their job. Aetna's net income fell 7 percent, to $1.1 billion, in the first nine months of this year. Excluding one-time items, Aetna says profit fell 28 percent.

The industry is getting a bit touchy given all the rhetoric in Washington. "This is an industry that is very resilient in one of the worst economies ever, and it's very well capitalized in the event of a catastrophe," Wayne S. DeVeydt, WellPoint's chief financial officer, says in an interview. "We ought to be applauded. We shouldn't be penalized." WellPoint is hardly a picture of robust financial health. Revenue dipped 1 percent, to $45.8 billion, through nine months this year. Even with cost reductions (it cut 1,500 jobs this year), net income declined 7 percent to $2 billion through September 30.

"There are many competing forces to maintain" those low margins, DeVeydt says. Insurers are losing leverage negotiating with large hospital systems on charges. And compared with drug companies that specialize in disease areas, insurance is a commodity with plenty of regulation and competition.

"In this case, capitalism is working quite well" DeVeydt says. "We're in an industry that has tremendous competition." If insurers wanted to raise rates through the roof, they'd be stymied by that competition, industry experts say. The real key to making money in health insurance, they maintain, is accurately predicting how much medical costs will rise.