State asks to oversee 3 insurers

One of the insurance companies has agreed to administrative oversight, while regulators are negotiating details with the other two, the officials said. Administrative oversight is a first step regulators take when they determine there is a need to monitor the financial condition of insurance carriers more closely. It does not mean the companies are insolvent.

Officials said the heightened concern is related to the fragile economy, which caused several major insurers to lose money in 2009. At least one of the letters was sent out after the state denied health premium increases for April 1, but before insurers reported first-quarter losses they blamed on the rate rejections.

Insurance Commissioner Joseph G. Murphy said that in recent years it has not been unusual for there to be administrative oversight of two insurers annually, including those that sell health, property, casualty, and auto policies. Typically, however, the process is kept confidential.

In most cases, such oversight ends in less than a year. But in some cases, regulators place insurers under administrative supervision, getting directly involved in their operations. If an insurer is on the verge of failing, it can be placed in receivership.

The latest moves seeking more oversight came to light this week when the state released e-mails sent by a Division of Insurance official, Robert G. Dynan, who complained that the state’s April 1 rejection of proposed double-digit rate increases for small firms and individuals could threaten insurers’ financial stability and lead to “a train wreck.’’

In an April 30 message, Dynan, deputy commissioner of financial analysis, wrote to Murphy: “We recently placed three Massachusetts [insurers] under Administrative Oversight and plan to assess the situation and most likely will be placing more companies into Administrative Oversight in the next few weeks. The prospect of these companies’ surviving is called into question under a rate cap scenario.’’

Murphy said it was “not accurate’’ to say three insurers already were under administrative oversight.

The letters to insurers began an examination during which they will be asked to supply balance sheets, income statements, cash flow data, and more detailed business plans, as well as to keep regulators apprised of any litigation or acquisition plans. State officials would not say which carriers received the letters, but at least one is currently under administrative oversight.

Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, confirmed it had received a letter on April 7 notifying it that the state was opening an examination. Two other large insurers, Harvard Pilgrim Health Care and Tufts Health Plan, said they did not receive letters.

Lora Pellegrini, president of the Massachusetts Association of Health Plans, a trade group, blamed the state moves toward administrative oversight on the rate caps, which she said were imposed to boost Governor Deval Patrick’s political standing.

“My understanding is not all the plans received letters,’’ Pellegrini said. “If the governor keeps the rate caps in place, I can guarantee you all of the plans could have serious financial issues.’’