UPDATE 1-California health insurers subpoenaed in rate probe

* Probe examines possible unfair rate rises, claim denials

* Insurance companies have 30 days to turn over records

* Inquiry comes amid sharply rising premium increases (Adds details, quotes; byline)

By Steve Gorman

LOS ANGELES, Feb 25 (Reuters) - California Attorney General Jerry Brown on Thursday subpoenaed financial records and other documents from the state's seven largest health insurance companies as part of a widening investigation of the industry.

Brown said his office was looking into "possibly illegal practices" among state health insurers and is "very concerned that some of them are unjustly raising premiums and denying payment of legitimate claims."

The action by Brown, who is expected to officially launch a campaign for governor in the next few weeks, comes as sharp rate hikes instituted or planned by several leading California insurers have generated close public scrutiny.

California's biggest for-profit health insurer, Anthem Blue Cross, said earlier this week it intended to go forward with plans to raise its premiums for some individuals by up to 39 percent, despite criticism from the Obama administration.

The White House and congressional Democrats seized on Anthem's proposed rate hikes as part of their strategy to boost support for overhauling the U.S. healthcare system, the subject of a bipartisan policy summit in Washington on Thursday.

The head of Anthem's parent company, WellPoint Inc (WLP.N), appeared on Capitol Hill on Wednesday to defend its rates, rejecting charges that it was raising premiums to "squeeze" consumers in the name of profit.

The company says rising premiums reflect escalating costs of delivering medical care and the exodus of many healthy consumers from the ranks of policyholders.

But Brown said the rate increases were "devastating to Californians strapped by the economy (and) in some cases, they are possibly illegal."

"Our best attorneys are going to get to the bottom of this, and where we find violations of California's unfair business laws, we intend to stop them," he said.

California Insurance Commissioner Steve Poizner, who is seeking the Republican nomination for governor, recently retained an outside actuary to examine the company's rates.

Separately, Poizner said this week that a review by his office found more than 700 violations of state law in the way Anthem has processed insurance claims over the past four years, including excessive delays in paying those claims.

The subpoenas from Brown build on an investigation opened in September into the practices of health maintenance organizations (HMOs), prompted by reports that California's five largest health insurance providers were denying claims at rates of up to nearly 40 percent, he said.

The seven companies covered by the subpoenas -- Aetna Health (AET.N), Anthem Blue Cross, CIGNA (CI.N), Health Net, Blue Shield of California, Kaiser Permanente and PacifiCare -- were given 30 days to turn over the records sought. (Editing by Dan Whitcomb and Cynthia Osterman)