In an interesting test case for future federal insurance regulatory powers, on Thursday Massachusetts denied almost 86% of proposed health insurance rate hikes for 2010. That’s 235 of 274 hikes averted, worth $6-8 million a month, if anyone’s counting.

True, some are calling it political gamesmanship, as governor Deval Patrick is up for re-election this year — and he’s running against a former health insurance CEO. But it’s also a good time to call insurers’ bluff. Is it really a “very reckless act”, as the Massachusetts Association of Health Plans would have us believe? Will insurers have trouble paying claims on their supposed razor-thin margins? Will this encourage them to step up claims denial and “fraud”-based rescissions?

I would like to think that Massachusetts insurers will take this opportunity to become the lean, efficient transaction middlemen they should have been all along. Reining in costs can involve cutting back lobbyist and advertising budgets, CEO salary and perks, and the administrative labyrinth constructed for the express purposes of delaying and denying claims. It can mean seriously negotiating rates with the powerful and consolidated provider market — after all, the insurance industry is now almost as consolidated and powerful as it can be.

We’ll see what they decide during the appeals process. Meanwhile consumers and small businesses can breathe a huge sigh of relief and continue to pay last year’s sky-high rates instead of the stratospheric ones planned to start the second decade of the 21st century. Read more at the New York Times.

Photo Credit: Mike Licht, NotionsCapital.com

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