Elevance Health rebuffs providers’ calls to cancel a contentious out-of-network payment policy

Healthcare providers in 11 states face the imminent possibility of payment reductions from a top subsidiary of Elevance Health, one of the nation’s largest insurers.

Anthem Blue Cross and Blue Shield announced this quarter that it would apply a 10% penalty to the allowed amount on commercial insurance claims when hospital care is provided by out-of-network clinicians starting Jan. 1.

Hospitals also could have their Anthem contract terminated for repeat offenses, the insurer indicated, adding that balance-billing Anthem members for the penalty amount will be prohibited.

The policy will take effect in Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, Ohio and Wisconsin. Thus far the policy is not set to apply in other markets where Anthem plans operate, including California, New York and Virginia.

Exceptions to the policy apply in emergency scenarios and for services that have received prior authorization. Elevance has subsequently said rural, critical-access and safety-net hospitals will be exempt.

An analysis by healthcare attorneys at Davis Wright Tremaine, LLP notes that the 10% penalty could apply not only to the specific services performed by an out-of-network clinician but to all reimbursement for the care episode in which the clinician was involved.

“Facilities may have contractual rights to object to Anthem’s intent to use ‘administrative penalties’ to reduce contractual reimbursement,” the attorneys wrote. “State laws may also afford certain protections.”

Hospitals push back

During the past week, the American Hospital Association (AHA) and the Federation of American Hospitals (FAH) separately wrote to Elevance seeking for the policy to be rescinded.

“This policy conflicts with the spirit of the contracts Anthem has negotiated with its in-network hospitals and may in some cases violate the terms of its contracts,” FAH wrote.

Points made by the two associations include the impracticality of implementing the policy in hospitals.

“Anthem’s policy is fundamentally unworkable for hospital operations,” the AHA wrote. “The policy will require hospitals to verify in advance the network status of every provider involved in a patient’s care, a task made impossible by the current state of Anthem’s provider directories.”

FAH posited that the goal of the new policy goes beyond protecting patients from unanticipated bills for out-of-network care, especially since 2020 legislation known as the No Surprises Act (NSA) already offers such protection.

“This appears to be a strategy focused purely on using in-network hospitals as leverage to coerce independent providers into accepting Anthem’s contractual terms, even though hospitals themselves are not parties to these agreements,” FAH wrote.

Physicians are leery about the prospective impact.

“It is not likely that a large hospital will simply absorb a 10% payment reduction for services performed by nonparticipating physicians,” states a letter to Elevance from the American Medical Association (AMA) and more than 75 federal and state medical societies. “Instead, hospitals may pass that cost on through contracts with physicians or insist physicians enter into health plan contracts that are not a good fit for the practice.”

What’s motivating the insurer

In a written reply to the physician groups’ letter, Elevance Health said the company does not feel the NSA is viable as currently applied. The volume of activity in the NSA’s independent dispute resolution (IDR) portal for arbitrating out-of-network payments has vastly exceeded CMS’s projections, with more than 4.6 million disputes filed since the portal’s launch in April 2022, according to government data.

Across the two years for which applicable data is available, 2023 and 2024, providers initiated at least 85% of disputes and won 82% of cases, according to insights presented by the Center on Health Insurance Reforms at Georgetown University during a September webinar. Five provider groups owned by private equity accounted for almost 60% of the filed disputes.

For 2024, the average amount awarded when providers won cases was nearly 450% of the qualifying payment amount (QPA), the benchmark used to reflect the median in-network payment rate for a service. 

When such awards “become routine for non-emergent cases, the resulting costs are ultimately borne by employers and their employees through higher premiums and out-of-pocket costs, even though individual patients may be protected at the point of service,” Elevance wrote.

In its letter, the AHA countered that the Anthem plans could address the underlying concern by shoring up their IDR operations, such as by more frequently participating in disputes to which they are a party and more consistently engaging with providers during the mandatory negotiation period that precedes IDR.

The physician groups said the Anthem plans would do better to make changes “that incentivize physician participation in your networks,” citing the potential for improvements in contracting, prior authorization processes, denials, credentialing, payment processes and referral networks.

Attempting to assuage concerns

In its letter, Elevance said Anthem plans will not seek to apply the policy punitively, recognizing “that hospital staffing and scheduling are complex. We will evaluate hospital performance holistically and do not intend for this policy to penalize isolated or unavoidable instances where an out-of-network clinician is used; rather, the focus is on persistent patterns in which, despite adequate in-network capacity, non-emergent services for our members are routinely furnished by nonparticipating clinicians.”

Elevance also tried to argue that the new policy will not affect the ability of physicians to remain independent, writing, “Our intent is not to compel physicians into any particular employment model or to disadvantage smaller practices. The policy does not require any physician to contract with an Elevance Health plan. Rather, it encourages hospitals, when scheduling non-emergent services for our members, to prioritize available in-network clinicians.”