Jan. 6, 2011 -- Tens of thousands health insurance policyholders in California begin the new year bracing for rate hikes of up to 59 percent in the coming months -- and they are not the only insurance company hiking rates. Wendy Lemlin recently found out her rates are going up too.

"I will probably drop my health insurance and pray that I continue to be as healthy as I've been," she said today.

Watch ABC's "World News with Diane Sawyer" for more on this story.

Under the new health care reform law, the federal government is able to shine a spotlight on rate increases, but it can't reject them. To customers like Lemlin who want someone to confront the insurance companies, Secretary of Health and Homeland Security Kathleen Sebelius said "that's really what the state authority would do."

In California, the state insurance commissioner does not have full regulatory authority over rate increases. Sebelius recommended customers contact their state legislators directly to urge them to fix it.

"They should contact the governor of their state, and the state legislature demanding those laws be changed," she told ABC News.

Californians like Michael Frasier, who runs a sporting goods company, say they feel helpless. "I feel like there's nothing I can do about this since it's out of my hands, and there's no law to prevent this right now in California."

He first thought the letter from Blue Shield telling him of his 59 percent rate increase "was a joke."

But now, reality is setting in -- beginning March 1 his monthly payment will increase from $271 to $431. "I'm not sure what I'm going to do. I'm considering dropping my health care insurance completely. It's kind of scary at 53."

Blue Shield in San Francisco said 193,000 policyholders will see increases averaging 30 to 35 percent after three separate rate hikes since October.

In a statement issued today, Blue Shield said the new rates "reflect trends that were building long before health reform" and "our individual market medical costs are rising." Blue Shield of California said it expects to lose tens of millions of dollars on its individual healthcare business in 2010 and 2011.

What About Healthcare Reform?

Blaming the tough economy is "pretty outrageous," Frasier said. "If I tried to charge my clients 59 percent more, they would laugh me out of the room."

The national health care reform law will eventually allow the federal government to spotlight rate hikes that it deems excessive, discriminatory or unjustified, but those rules will not be final for months and will not stop rate increaso by Blue Shield of California.

The U.S. Department of Health and Human Services unveiled health insurance rate review regulations on Tuesday, requiring justification for all increases of more than 10 percent. The proposed regulations defer to states' review laws.

Blue Shield said its new rates meet the federal requirement that 80 percent of premiums be spent on healthcare expenses.

Rate Hikes Across the Nation

It's not just in California. Halfway across the country, the Iowa Insurance Division held public hearings on health insurance provider Wellmark's proposed insurance rate hike in more than two-dozen cities. And in New York State, Wellpoint Insurance plans to raise rates 28 percent on small business health plans.

Iowa Insurance Division's consumer advocate Angel Robinson said over 46,000 Iowans could be affected by the proposed 10.8 percent rate increase.

The hearing is part of a new transparency law adopted by Iowa lawmakers last year after Wellmark requested an 18 percent increase in premiums in May.

Robert Bernard of Urbandale, Iowa attended today's hearing because of personal experience with increasing premiums on his individual policy. Though he switched insurance companies Jan. 1, Bernard, now retired, previously was insured by Wellmark and saw double-digit rate hikes in the past.

"Rate increases cause more and more people to be unable to afford insurance," he said. Rising costs "cause economic stress for people and their mental and physical health deteriorates."

His high insurance payments were difficult to handle -- Bernard said he "just didn't have the money." On top of increasing rates, he said his insurance plan did not cover a necessary medical procedure, forcing him to make monthly payments to both his medical provider and insurer.

Help On The Way?

Talking to the head of the insurance commission after the hearing, Bernard said his "sense is she and other people would do everything within their power to minimize the impact on people's lives and allow" more Iowans to keep their insurance.

ABC News' Brian Hartman contributed to this report.

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