The Massachusetts Division of Insurance has rejected 235 of 274 rate increases proposed by health insurers for small groups.

State insurance commissioner Joseph G. Murphy disapproved the base rates–which called for increases of up to 32%–after determining that they were excessive and “unreasonable relative to the benefits provided.”

Consumer Watchdog, a consumer advocacy group, said the decision shows the need for effective prior-approval rate regulation in every state to ensure that health insurers charge fair prices under national health reform legislation.

The national health reform law is modeled on Massachusetts’ mandatory health insurance law.

Massachusetts regulators recently adopted emergency prior approval regulations in anticipation of large insurance premium increases, according to Consumer Watchdog.

The Obama administration and House Democratic officials wanted to include a provision that would have provided state health insurance regulators in states that have no rate control statutes the authority to ask the Department of Health and Human Services to reject such rates.

But the provision was dropped after the Senate parliamentarian ruled that 60 votes would have been needed to include such a provision in legislation in the Senate.

According to Murphy, policyholders who have already made a premium payment under the disapproved rate will receive a refund or credit on their base rates.

The Massachusetts DOI’s emergency regulation went into effect Feb. 10 and was added at the request of Gov. Deval Patrick in an effort to reduce skyrocketing health care costs for small businesses, Murphy said.

Under previous Massachusetts rules, carriers filed rate changes before or on the effective date of the new rates.

The amended regulation requires that carriers file small-group rates 30 days before their effective date and that additional actuarial information be included with the proposed rate changes, enabling the Division of Insurance to evaluate whether the proposed rate changes are reasonable.

“At the beginning of this process and throughout our review of the rate filings, we made it clear to insurers that the Division of Insurance would be taking a close look at proposed increases,” Murphy said. “In most cases, division staff determined that the changes were excessive and necessitated disapproval.”

Carmen Balber, Washington director of Consumer Watchdog, said, “Massachusetts has quickly come to realize that when the government requires everyone to purchase a health insurance policy or face tax fines, it must also exercise real oversight of what health insurers can charge.”