Anthem BCBS of NY seeks dismissal in ‘ghost network’ case

Facing accusations of maintaining a “ghost network” of doctors to intentionally confuse and deprive patients of needed healthcare, Anthem Blue Cross Blue Shield of New York said last week the case is a matter of federal jurisdiction and not the state court where the case is filed.

In a 32-page memorandum filed with its motion to dismiss the lawsuit, which was brought by several Anthem policyholders, attorneys for Anthem Blue Cross said the plaintiffs are enrollees in the Service Benefit Plan, a health insurance plan for federal employees, retirees, and their families, which is governed by the Federal Employees Health Benefits Act.

“Plaintiffs’ claims—all brought under state law—must be dismissed with prejudice because they are fundamentally inconsistent with FEHBA and the regulations and contracts thereunder,” the memo contends.

The lawsuit, filed in October of last year in the Southern District of New York, said the inaccurate doctor network led patients to pursue expensive out-of-network care that led to delays and unnecessary costs.

The law firms representing the plaintiffs completed a secret shopper survey in which they called the first 100 doctors on Anthem's network directory and found only seven out of the 100 actually accepted insurance and would take new patients. Most did not accept the insurance, were not mental health providers, or did not accept new patients.

The lawsuit claims that there were 4,300 providers listed on a downloadable directory of psychiatrists, but many of those listings were duplicates with different phone numbers and addresses.

'We had no idea it was this bad'

“We knew ghost networks were a problem, but we had no idea it was this bad," said Steve Cohen of Pollock Cohen.

The lawsuit said ghost networks cause significant financial harm to patients because going out of network for their care incurs inflated expenses, as well as delays in finding essential care. Often, patients give up because they can't find in-network doctors who accept their insurance.

The plaintiff, Anthem said, “could have informed Anthem of her difficulty in finding an in-network provider and requested an accommodation such as a single-case agreement that would have allowed her to see an out-of-network provider at in-network rates.”

Anthem argues for dismissal

In its response filed last week, Anthem attorneys did not address the validity of the accusations and only made the case that the lawsuit should be dismissed.

“They are saying it doesn't even belong in court,” said Cohen. “And that the only remedy is for people to complain to the Office of Personnel Management. We obviously disagree and will be filing our opposition within the next few weeks.”

Accusations of healthcare insurers maintaining “ghost networks” are becoming common and have become a concern in both public discourse and regulatory oversight. Investigations and audits (including those by government agencies like the GAO and HHS) have found that many insurance provider directories are routinely inaccurate, with error rates in some cases exceeding 40%-50%.

The issue spans across Medicare Advantage, Medicaid managed care, and ACA marketplace plans. Medicare Advantage, in particular, has been heavily scrutinized for this. The Centers for Medicare & Medicaid Services (CMS) and several state insurance departments have cited numerous insurers for failing to maintain accurate provider directories.

Critics say the ghost networks give the illusion of network adequacy, helping insurers meet regulatory requirements without providing real access.

Legislation introduced

State and federal legislation is being introduced or expanded to mandate more frequent directory updates, stronger penalties, and clearer consumer protections.

In a December report, the New York State Attorney General's Office outlined rampant evidence of “ghost networks. The report found that 86% of the listed mental health providers who staffers had called were “unreachable, not in-network, or not accepting new patients.” Though regulations require insurers to publish accurate directories, New York Attorney General Letitia James’ office did not find evidence that the state’s own insurance regulators had fined any insurers for their errors.

The Requiring Enhanced & Accurate Lists of Health Providers Act, or the “REAL Health Providers Act was introduced in Congress by Sen. Michael F. Bennet (D-CO). The bill aims to prevent ghost networks by mandating more stringent provider director accuracy requirements for Medicare Advantage plans.

Another proposed federal bill, the Behavioral Health Network and Directory Improvement Act, introduced by Sen. Tina Smith [D-MN], aims to address the issue of ghost networks in behavioral health care for individuals enrolled in private health insurance plans. The act proposes stricter requirements for provider directory accuracy, including mandatory independent audits of health plan networks by both the federal government and the health plans themselves.

Audit results would be published online for public transparency, with civil monetary penalties for non-compliance. Additionally, the bill calls for higher network adequacy standards, parity standards to keep behavioral health reimbursements on par with physical health, and for behavioral health providers to regularly update the information they submit to health plans, including timely information on whether they can accept new patients. Both bills are awaiting action in committees.

Several states, including Illinois, Oklahoma, New Mexico, and Massachusetts, have implemented measures to reduce ghost providers.

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].