Health insurers sue state over rate caps

The Patrick administration and the state’s leading health insurers are facing off in court over an attempt to cap small business premium growth.

Six leading companies sued the Division of Insurance, alleging that its decision to reject the bulk of premium increases that were to have taken effect April 1 was arbitrary and will affect their bottom line.

The administration says the insurers did not justify increases ranging from 8 to 32 percent. Gov. Deval L. Patrick says the hikes are keeping small businessmen from adding jobs critical to the state’s economic recovery.

The insurers contend that capping their rates without any change in the charges made by doctors and other medical providers could cause them to lose hundreds of millions of dollars.

Suffolk Superior Court Judge Stephen E. Neel denied an injunction sought by the insurers in early April, upholding the state’s rejection of 235 proposed rate hikes; however, the insurers’ suit against Insurance Commissioner Joseph G. Murphy will go forward.

Neel agreed with the state that the insurers should appeal Murphy’s decision within the insurance division before bringing their fight to the courts.

All six of the insurers who saw rates rejected received letters threatening them with fines if they failed to revise their premium rates by April 16. At press time, two of those insurers, Harvard Pilgrim Health Care and Fallon Community Health Plan, reportedly had yet to comply.