U.S. gov't to keep "close watch" on health insurers

NEW YORK (Reuters) - The U.S. government will look carefully at health premium rates and will continue to keep a "close watch" on health insurers to make sure they are treating customers fairly, the U.S. health secretary said on Thursday.

U.S. Health and Human Services Secretary Kathleen Sebelius said she discussed premiums during a meeting earlier on Thursday with leaders of several health insurance companies, about two months after the passage of a nationwide healthcare overhaul.

Sebelius met with the chiefs of WellPoint Inc, which has been a target of the government's criticism, as well as with Cigna Corp, Health Care Service Corp and the Blue Cross Blue Shield Association.

"As we proceed, we'll continue to look for opportunities to work with insurance companies but also keep a close watch to make sure that they're treating their customers fairly," Sebelius said in a press conference in Washington.

While states will still regulate rates that insurers charge consumers, Sebelius said she reminded the executives that the new law provides her department with tools to limit rate hikes, including the right to review increases and a requirement that insurers spend a certain amount of premiums on medical costs.

"We had a lot of discussion that I think was very good about the fact ... that rates are now at a crisis point, that they are looking at a market where more and more people are dropping coverage because of the increase in price," Sebelius said.

"We're going to be looking very carefully at what's happening in those marketplaces going forward," Sebelius said. "The worst of all worlds is to have more Americans driven out of the market in the next couple of years and end up with a sicker population, if you will, because they don't have ongoing healthcare."

Earlier this month, Sebelius called on states to reexamine WellPoint's rate increases after errors were found in the insurer's filing for proposed rate hikes in California.

The U.S. healthcare reform law passed in late March aims to expand coverage to more than 30 million uninsured Americans over the next several years while imposing new regulations and fees on the health insurance industry.

Smooth implementation of the healthcare reforms is critical for Democrats, who are expected to face a tough fight to hold onto their majority in Congress in November's midterm election.

Sebelius said Americans "are already reaping the benefits" of the new law, mentioning moves by insurers to comply early with requirements to ban policy cancellations, known as rescission, and expanded coverage for young adults on their parents' plans.

(Reporting by Lewis Krauskopf; Additional reporting by Susan Heavey in Washington; Editing by Richard Chang)