Pennsylvania probing health insurers over rates

* State's nine largest health insurers under scrutiny

* Aetna, Coventry, UnitedHealth among them

By Lewis Krauskopf

NEW YORK, June 9 (Reuters) - Pennsylvania is investigating the state's nine largest health insurers over a pattern of rate increases in the latest salvo against the industry after the passage of a U.S. heathcare reform law this year.

The state is seeing "exorbitant" rate increases of more than 50 percent for some small businesses, according to Pennsylvania Gov. Edward Rendell.

"This level of increase is not about passing on increases in health spending, which average in the 5 percent to 10 percent range," Rendell said in a press release on Wednesday. "This is about companies trying to get the highest possible rates before the federal reforms take effect."

Highmark and Independence Blue Cross are the largest two insurers by market share, according to the Pennsylvania insurance department. Together, they hold more than 52 percent share of premiums written.

Other health insurers being examined include: Aetna Inc (AET.N), the state's third biggest insurer, Coventry Health Care Inc (CVH.N) and UnitedHealth Group (UNH.N).

The state's insurance department's probe is focusing on the extent to which increases are driven by what it calls "questionable health profiling tools," such as the use of medical questionnaires.

"Highmark and Independence Blue Cross do not use these tools, but the next seven largest insurance companies all do," Insurance Commissioner Joel Ario said.

The health reform law passed in March and championed by President Obama aims to expand coverage to more than 30 million uninsured Americans over the next few years.

The Obama administration has expressed concerns that increasing premium rates will drive people out of the market before reforms kick in in 2014.

The U.S. Department of Health and Human Services earlier this week began offering the states millions of dollars to beef up their oversight of how much health insurers plan to charge.

Pennsylvania will apply for a grant by the July 7 deadline.

Ensuring companies do not raise insurance costs is key for Democrats implementing the controversial reforms ahead of the November mid-term elections. Like Obama, Rendell is a Democrat.

In a statement, Highmark spokesman Michael Weinstein said it "recognizes that premium increases represent a burden for many small companies and organizations."

The new law "does not decisively address the primary driver of higher health insurance premiums: unsustainable increases in medical costs," Weinstein said.

In April, WellPoint Inc (WLP.N) said it would revise its controversial rate request in California after errors were discovered in its rate filing. WellPoint's plan to raise rates by as much as 39 percent for some individuals was strongly criticized as Democrats rallied support for the reform law. (Reporting by Lewis Krauskopf)