CalPERS Anthem PPO Litigation About Unfair Low Out of Network Reimbursement

Out-of-Network Claims in PPO Health Insurance Coverage.

Anthem CalPERS PPO (PERSCare PERSELECT PERSChoice) Litigation, Proposed Class Action

What is Preferred Provider PPO health insurance?

A Preferred Provider Organization (PPO) is a type of health insurance plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. If you have a PPO plan, you will pay less if you use providers that belong to the plan’s network. You can use doctors, hospitals, and providers outside of the network for an additional cost².

PPO plans offer more flexibility than other types of health insurance plans because they allow you to see any doctor or specialist you choose without needing a referral from a primary care physician. However, if you choose to see an out-of-network provider, you will typically pay more out-of-pocket costs than if you see an in-network provider⁴.

It is important to carefully review the terms of your PPO plan to understand what is covered and what is not when seeking care from in-network and out-of-network providers.

Source: Conversation with Bing, 4/29/2023

(1) Preferred Provider Organization (PPO) – Glossary |

(2) What Is a PPO? (Preferred Provider Organization) – Policygenius.

(3) What Is a Preferred Provider Organization (PPO)?.

(4) Preferred Provider Organization (PPO): Definition and Benefits.

(5) What is a preferred provider organization? |

How do insurers determine the amount to pay a claim for out-of-network medical services? Do they use a database? What information is contained in the database? How does an insured know whether the PPO health insurer’s reimbursement for out of network claims is correct, accurate and sufficient?

For out-of-network medical providers, insurers use formulas to determine the dollar amount they will pay for medical services. This methodology may be referred to as “usual and customary charges,” “reasonable and customary charges,” “maximum benefit allowance,” or “prevailing rate in the community.” Insurers’ pricing formulas often rely on Medicare reimbursement rates (increased by a percentage) and prices charged by other providers in the same area¹.

It can be difficult for an insured to know whether a PPO health insurer’s reimbursement for out-of-network claims is correct, accurate, and sufficient. If you have concerns about the reimbursement amount for an out-of-network claim, you may want to contact your insurance company to ask for more information about how the reimbursement amount was calculated. You can also review your insurance policy to understand what is covered and what is not when seeking care from an out-of-network provider.

Source: Conversation with Bing, 4/29/2023

(1) Balance Billing and Out-of-Network Providers.

(2) Health Insurance Reasonable and Customary Fee.

(3) How To Get Insurance To Cover Out-of-Network Charges.

(4) Types of Out-of-Network Reimbursement | FAIR Health.

(5) Allowed Amount on a Health Insurance Statement.

Introduction Heinz et al v. Anthem CalPERS (BC664844, Los Angeles County Superior Court, Spring Street Courthouse.) is a proposed class action against Anthem Blue Cross and the California Public Employees Retirement System,and its Board of Administration (CalPERS) for Fraud, Misrepresentation, unfair business practices, and related claims regarding the promotion, sale, reimbursement, and other practices related to the PPO insurance, out-of-network services, and other issues relating to PERS Care (PERSCare) ,PERS Choice (PERSChoice), PERS Select (PERSSelect), and other PPO health insurance (i.e. PERS Gold, PERS Platinum, etc).

More specifically, the proposed class action (BC664844)against CalPERS and Anthem Blue Cross Life & Health Insurance Company and/or Blue Cross of California d/b/a Anthem Blue Cross, (“Anthem”), aalleges misrepresentation, concealment, unfair business practices, and other claims related to (1) CalPERS’ and Anthem’s misrepresentations regarding the benefits, advantages, and terms of the Preferred Provider Organization (PPO) health benefit coverages (PERS CarePERS Choice, PERS Gold, PERS Platinum, and PERS Select, etc); (2) Anthem engaging in unfair business practices, including misrepresentation, false advertising, unfair practices, deceptive practices including manipulating Claim Target Guarantee or other incentives to gain increased administrative fees and/or secret profits; and (3) the resulting damage to individuals who were enrolled in PERSCare, PERS Choice, or PERS Select at any time between January 1, 2008, to December 31, 2014 (“Plaintiffs”).

Introduction      Misrepresentation       Unfair Business Practices         Example of Class Rep            Class Claims


This case involves layers of deception by CalPERS and Anthem that proximately hurt Heinz and perhaps 325,000 proposed class members each year for the period at of least 2008 to 2014. At the same time, Anthem gained secret profits (likely many millions of dollars) under confidential terms of a “Health Benefit Administration” contract with CalPERS. Anthem gained secret profits from its unfair business practice of misrepresenting, false advertising, and secretly reducing the base rate and the amount of reimbursement to PPO subscribers for “out-of-network” medical services. CalPERS and Anthem compounded the problem by requiring a multi-tiered administrative process that they solely controlled and delayed for many many years.

Material Misrepresentations. From at least 2008 to 2014 and likely continuing to the present, Anthem and CalPERS widely distributed promotional materials across the state that misrepresented the material terms of PPO coverage. Anthem and CalPERS wrote, distributed, and made available standardized promotional material (Health Program Guides, Health Benefit Summaries, and other) that made identical, material misrepresentations about the benefits, advantages, and terms of the PERS Care, PERS Choice, and PERS Select coverage.

The main advantage of PPO insurance in comparison to HMO or other insurance was that PPO coverage represented that it reimbursed subscribers for out-of-network medical services. Reimbursement for “out-of-network” services was essentially the main reason to buy PPO coverage. The amount and calculation of the reimbursement for out-of-network services were material terms. CalPERS and Anthem misrepresented the material terms in standardized documents distributed across the class, state-wide. CalPERS and Anthem exposed Heinz and each proposed class member to these material misrepresentations as part of Anthem and CalPERS’ long-term advertising campaign. Exhibits 24-26,28,39-53,62-104.

As an example, CalPERS’ and Anthem’s promotional materials for the PPO coverage specifically represented and advertised that the difference between the reimbursement for “in-network” service and the reimbursement for “out-of-network” service was a “percentage of charges”. Anthem and CalPERS prominently represented that reimbursement for “in-network” medical claims would be calculated at 80% to 90%. In the same documents, Anthem and CalPERS prominently represented that reimbursement for “out-of-network” medical services would be calculated at 60%.

CalPERS and Anthem misrepresented and did not disclose that Anthem and CalPERS did not utilize the same base rate in calculating the amount of the respective reimbursements. In fact, Anthem and CalPERS used significantly lower base rates for calculating “out-of-network” reimbursement than Anthem and CalPERS used when calculating “in-network” reimbursements for the same medical service, using the same standardized rubric of medical service codes. Even though both services were virtually identical, Anthem and CalPERS used significantly lower base rates for “out-of-network” reimbursement even when the same medical services were provided in the same location by the same health care professional (who chose to leave the Anthem contracted network).

Anthem and CalPERS’ material misrepresented that reimbursement amounts differed by a change in the percentage of charge. This was false, and they knew it (or should have known it). Anthem and CalPERS’ reduction in the base rate for “out-of-network” medical services rendered CalPERS and Anthem’s “differing by a percentage of charge” and similar misrepresentations as materially false and misleading. Since CalPERS and Anthem did not use the same “Allowable Amount” in both calculations, the difference in the reimbursement was not by “percentage of charge”. Instead, CalPERS and Anthem’s calculation for reimbursement of “out-of-network” medical services was further reduced by both the lower base rate and then by 60%.

Anthem and CalPERS’ hidden double reduction compounded both reductions and led to reimbursements of “out-of-network” services that were approximately 15% to 20% of the “in-network” reimbursement amount. [1]

[1] The medical services were coded with the same matrix that was uniform for both “in-network” and “out-of-network” medical services.

Hidden Reduction of Base Rate for Out-of-Network claims. Contrary to the express and implied representations in Anthem’s and CalPERS’ promotional materials that Anthem and CalPERS widely distributed over many years, CalPERS and Anthem substantially reduced the base “Allowable Amount” rate for “out-of-network” services simply because the services were “out-of-network”. Anthem and CalPERS reduced the base “allowable Amount” rate for out-of-network services, and then reimbursed “out-of-network” services at 60% of this hidden reduced “allowable Amount” base rate.

What is PPO Insurance?

As background, when patients with health insurance seek medical services, they either pay a small co-pay at the time of service (“in-network”) or they pay the whole cost of the service and then seek reimbursement (if they have purchased a PPO plan) from a health insurer. Doctors, hospitals, and other health care providers who have contracted with a health insurer to provide services are “in-network” providers. “In-network” providers have already negotiated a price for each coded service before the service is rendered[1].

Doctors and health care providers that do not contract with a health insurer are called “out-of-network” providers. The reimbursement “price” of medical services by an out-of-network provider is not already negotiated and is not patent or transparent. Generally, the reimbursement rates for out-of-network services are determined under the terms of the Evidence of Coverage (“EOC”), or rather the insurer’s interpretation of the EOC language. Some EOCs list the specific reimbursement amounts for each out-of-network service. CalPERS and Anthem’s promotional material, EOCs, and other documents do not reveal specific pricing for “out-of-network” services.

Doctors, hospitals, and other health care providers identify the medical services by the same specific standardized codes whether the service is rendered by an “in-network” or “out-of-network” provider. For “out-of-network” services, the patient then submits these coded bills to a health insurance company seeking reimbursement. The price of reimbursement for a specific “out-of-network” service was not previously determined.

Upon receipt of a bill, insurance companies process the reimbursement using the standardized medical code and the zip code and identify the base reimbursement rate (“Allowable Amount”) for the specific coded service[1]. .

For these purposes, the medical service reimbursements are determined by finding (i) the base rate or “Allowable Amount” for the type of service provided with reference to the medical code by, and multiplying that by (ii) the percentage of charge.

  1. [1] CalPERS apparently delegated to Anthem the right to determine the reimbursement “price” for all “out-of-network” services

[1] Reimbursements for emergency medical services are not involved in this case. By law, reimbursements for emergency services are priced pursuant to an industry-standard often called usual customary and reasonable (“UCR rate”). There is no contract, negotiation, or discretion involved.

Ingenix database litigation, CalPERS Anthem PPO Litigation

Years ago, Health Net signed off on a settlement of three class-action lawsuits that would have far-reaching and expensive consequences.

CalPERS and Anthem have fought similar claims for 15 years. See

Health Net health plan agreed to pay $215 million to more than 2 million members to settle accusations that its coverage of out-of-network claims was rigged in its favor.

The case alleged that Health Net used a database managed by Ingenix, a United Health Group subsidiary, which Health Net used to calculate the “usual, customary, and reasonable” (UCR) rates providers charged for a service.

As background, in the promotional material or Evidence of Coverage (EOC), PPO Health plans often agree to shoulder a percentage of out-of-network costs based on the UCR. If an out of network doctor’s visit is $400, for example, the insurer might pay 80 percent ($320), less a $20 co pay so that the out of network doctor is paid $300.

Ingenix and other databases have been accused of reporting artificially low rates for out of network providers, such as $76 when the same provider was paid $300 when in network.

These tactics and subterfuges cause PPO subscribers a larger share of the actual bill.

Judge Faith S. Hochberg of the U.S. District Court for the District of New Jersey said in summer 2008 that the settlement “raises a clarion call for greater disclosure about the databases used for health care coverage.”

The attorney general of New York, Andrew Cuomo, responded, litigated, and secured multimillion-dollar settlements with some of the nation’s biggest insurers: Aetna, WellPoint, UnitedHealth, and others. Cuomo says his office reviewed a million claims and found that doctors in New York were underpaid as much as 28 percent on their bills because of the way Ingenix engineered its system to allegedly ignore high-dollar claims to come up with a deflated average UCR rate.

With part of the funds, a nonprofit, Fair Health, was set up to collect and distribute more accurate data .

The transition was supposed to take six months. In late April, insurers are still waiting to hear

In the meantime, some insurers and reinsurers could see opportunity in the confusion