Health Insurance Rate Hikes: Denied

State officials in Massachusetts just rejected the vast majority of health insurance companies' requests to raise premiums for people covered in small-business plans.

This is the latest in the whole higher-health-costs-meet-higher-premiums-meet-politics story.

Insurers filed 274 requests to increase premiums; the state rejected 235 of them. The requests were rejected because insurers wanted increases that were much larger than the rate of medical inflation. And the insurers failed to show that they had renegotiated reimbursement rates with doctors and hospitals, the state said.

Carriers had proposed rate hikes from 8% to 32%, the Boston Globe says. Some of the state's largest insurance companies posted losses last year, according to the Globe.

Massachusetts put a universal coverage plan in place a few years back, and the state has been struggling with rising health costs. The Governor, Deval Patrick, put emergency regulations in place in February to allow the state to block premium increases. Deval is up for re-election; his Republican opponent — Charlie Baker, a former health-care exec — opposes the rate restrictions.

A spokesman for the state's health insurance industry group told the Globe that "if we're not going to be allowed to have our prices cover our costs, that will be a problem for the whole industry."

The fight over the rate increases in Massachusetts is reminiscent of the howling in February when a WellPoint subsidiary in California wanted to raise rates for certain individual policies by 39%.

WellPoint argued that adverse selection was at work: In a bad economy, healthy people were choosing to go without insurance, or to buy bare-bones policies. The people holding on to solid, individual insurance policies were the ones with the highest health costs. That was driving up costs for the insurer, which were reflected in higher premiums.

The Obama Administration didn't buy that argument, and used the rate increase to push its health reform plan.

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