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Health insurers in New York, including the three main companies serving the Buffalo Niagara region, saw their requested 2015 rate increases slashed in half by state regulators. In response, the trade group that represents the insurance industry in Albany blasted the decision-making process as flawed and the approved rates as unrealistically low.

Overall, insurance companies operating in the state had requested an average rate increase of 12.5 percent for individual plans offered on or off the state health insurance exchange, but the state Department of Financial Services approved average rate increases of 5.7 percent for the plans.

For small-group plans, which serve between two and 50 people, the state’s insurers collectively requested rate increases of 13.9 percent, but the department approved increases of 6.7 percent.

State regulators said reducing the requested rates will save more than $1 billion next year for New York’s policy holders, including the 370,000 people who signed up for individual coverage through the New York State of Health exchange in late 2013 and early 2014.

“We closely scrutinized the proposed rate increases insurers requested and reduced them significantly where appropriate. While we have made substantial progress in reforming our health care market and holding down costs, there is much more work ahead,” said Benjamin M. Lawsky, the financial services superintendent, in a statement Thursday.

The largest insurer in the local market, HealthNow New York, which does business here as BlueCross BlueShield of Western New York, saw its requested rate increase for the individual market of 7.24 percent reduced to 1.41 percent. For the small-group market, BlueCross BlueShield requested a rate reduction of 1.82 percent, but that was reduced further to 2.31 percent.

“Affordable Care Act mandated services, ever-increasing pharmacy costs, taxes and the medical loss ratio are all part of the new reality for health plans, including ours, and impact the cost of health insurance,” said Jared M. Gross, BlueCross BlueShield’s vice president of healthcare economics, in a statement.

The second-largest insurer in the market, Independent Health, requested a rate increase of 5.44 percent for the individual market but was approved for a rate reduction of 2.01 percent.

Independent Health requested rate increases of between 4.35 percent and 5.44 percent on the small-group market but saw the rate increases trimmed to between 2.8 percent and 3.87 percent.

“We are still evaluating the impact of the state’s adjustments for each of our products. The rate adjustments we submitted were actuarially sound and in line with medical costs. Our proposed rate adjustments were also the lowest in years and were well below the state average for individuals and small groups,” said Frank Sava, an Independent Health spokesman.

And Univera Healthcare, the Amherst-based division of Excellus BlueCross BlueShield of Rochester, saw its requested rate increase of 19.59 percent for the individual market reduced to 9.23 percent and saw its requested small-group increase of 16.45 percent reduced to 12.2 percent.

“The bottom line is inadequate rates will result in reducing product choice or otherwise de-stabilizing the market, which is ultimately harmful to the health care system as a whole and to the consumers who rely on it,” said Paul Macielak, president and CEO of the New York Health Plan Association, in a statement.

Most insurers offer more than one product within the individual and small-group markets, and the companies said Thursday they still were applying the department’s changes to all of their offerings to determine the final 2015 rates. Individual and small-group plans make up a relatively small portion of the insurers’ business.

The rates set by insurers are largely driven by the cost of providing health care. For example, a law known as medical loss ratio requires that 80 to 85 percent of every premium dollar goes toward members’ medical costs, while the rest covers administrative costs such as salaries, overhead and marketing.

The next open enrollment period for individuals seeking coverage through the New York State of Health exchange begins Nov. 15 for plans that would take effect Jan. 1.

Employers with 50 or fewer workers can enroll in coverage through the small business marketplace at any time.

email: swatson@buffnews.com