Massachusetts Insurance Regulators Reject Most Requests for Higher Rates

Mr. Patrick, a Democrat who is running for re-election, most likely against a former health insurance executive, said the move was needed because “small businesses and working families can’t wait any longer” for relief. The requested premium increases, which were for individual and small-group plans, ranged from 7 percent to 34 percent.

Small businesses cheered the state’s intervention, but health insurers predicted disruption in the marketplace, including voided contracts and legal challenges. They said Mr. Patrick’s main target seemed to be his leading Republican challenger, Charles D. Baker Jr., the former chief executive of Harvard Pilgrim Health Care.

Mr. Patrick’s move, which Mr. Baker dismissed as “an election-year gimmick,” reflects the political advantage that many candidates perceive in attacking health insurance rates this year. Some analysts considered it a turning point in the health care debate in Washington when the Obama administration highlighted double-digit increases announced by Anthem Blue Cross of California.

“Right now, premium increases have never been more political,” said Sandy Praeger, the insurance commissioner in Kansas and past president of the National Association of Insurance Commissioners. “If there is any way to justify not granting the increase, commissioners are looking for them.”

President Obama proposed in February that the federal government be given new powers to rule on whether premium increases are justified and to force insurers to reduce them.

In the end, Congress did not go that far. The new law requires that the administration review premium increases annually, beginning this year. When rates are considered unreasonable, insurers will have to justify them publicly. But the law does not allow the federal government to control prices, leaving that authority to the states.

States vary widely in regulation of insurance pricing. In California, for instance, the insurance commissioner, Steven Poizner, is reviewing Anthem’s proposed increases of up to 39 percent. But he can deny them only if he finds that the company is not spending at least 70 percent of premiums on health claims, as required by state regulations.

In Massachusetts, the power to disapprove rates has been vested in the insurance commissioner since 1977. That authority had never been used before Thursday, said Insurance Commissioner Joseph G. Murphy, who was appointed by Mr. Patrick.

In February, at Mr. Patrick’s direction, the state’s Insurance Division required health insurers to give the state 30 days’ notice to review proposed rate increases scheduled to take effect April 1. Previously, insurers simply filed their increases when the new rates started, and they were rubber-stamped by regulators.

But on Thursday, Mr. Murphy denied 235 of the 274 proposed increases. He said he disapproved requests when companies significantly exceeded the region’s medical inflation rate of 5.1 percent, failed to justify why varying rates were paid to different hospitals, and did not forcefully negotiate prices with providers.

Insurers have a right to appeal, and rates from the previous year stay in effect in the meantime. Consumers will receive refunds or credits if they have already started paying higher rates.

Mr. Murphy said his department estimated that the denials would save consumers — and thus cost insurers — $6 million to $8 million a month.

Lora M. Pellegrini, the president of the Massachusetts Association of Health Plans, called the denials “a very reckless act” and warned that insurers on thin margins might have trouble paying claims. Three of the state’s four largest health insurers reported operating losses last year.

Ms. Pellegrini said the timing of the announcement suggested that it was “largely political.” She said Mr. Patrick should focus attention on the primary cause of health care inflation, which she identified as rising medical costs.

A Boston University study recently found that hospital costs per Massachusetts resident were 55 percent higher than the national average. An investigation this year by the state attorney general concluded that the pricing leverage exerted by academic medical centers played a major role.

“Arbitrary government price controls will not solve the problem and will likely cause unintended harmful consequences,” the state’s largest insurer, Blue Cross Blue Shield of Massachusetts, said in a statement.

Ms. Pellegrini warned that government rate regulation would splinter the coalition of stakeholders who have supported the state’s pioneering universal coverage law.

“This feels like an unraveling of all that good work,” she said.

But Barbara B. Anthony, the state under secretary for consumer affairs, who oversees the Insurance Division, said the state had studied whether the rate denials would pose a threat to solvency.

“During times like this,” Ms. Anthony said, “it’s unfortunate, but reactions tend to be hyperbolic and exaggerated.”

Mr. Patrick has said the price controls are needed as a bridge until the legislature can act on his administration’s proposal to restructure the way doctors and hospitals are paid. The governor and Democratic lawmakers are working to construct a system that would pay health care providers collectively to keep patients healthy while eliminating incentives that encourage unneeded treatment.

Mr. Patrick has also proposed legislation that would give the state new authority to reject unreasonable hospital and physician prices, just as it did Thursday with insurance premiums.