BOSTON (CN) - Massachusetts health insurers sued the state's insurance department for rejecting most of their proposed rate increases for small businesses.
The Massachusetts Association of Health Plans claims in Superior Court that it and Blue Cross and Blue Shield of Massachusetts, along with five other health plans, stand to lose $100 million by Department of Insurance Commissioner Joseph Murphy's decision.
It will be "a loss that will deplete their reserves, weaken their financial stability and in some instances threaten their near term solvency," the lawsuit said. "The market will suffer substantial uncertainty and turmoil as the individual plaintiffs and consumers endeavor to make significant long-term business decisions on what are likely temporary conditions."
Plaintiffs say Murphy's rejection of most of the proposed rate hikes is tantamount to creating rate caps "that are inadequate and actuarially unsound based on extraneous and extraordinary factors." They also say Murphy lacks the authority to set rate caps.
Plaintiffs submitted rate increases for April 1, but say Murphy "disapproved nearly all" of the submissions. The commissioner also directed the plans whose rates were declined to use rates dating back to April 2009.
The department wants the current rates frozen until the dispute is resolved.
Aside from the association and Blue Cross and Blue Shield, defendants include Fallon Community Health Plan; Harvard Pilgrim Health Care; Health New England Inc.; Neighborhood Health Plan Inc.; Tufts Associated Health Maintenance Organization.
The lawsuit was filed by Dean Richlin with Foley Hoag.
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