Anthem Loses (and Wins) in a Lawsuit Filed by California Hospital Association for Violating California Patient Protection Laws
Last April, the California Hospital Association (CHA), a nonprofit member organization representing over 400 hospitals and health systems throughout California, sued Anthem Blue Cross in Los Angeles County Superior Court, alleging that certain Anthem practices were depriving patients of timely post-hospital health care and forcing hospitals to provide (and pay for) additional care after patients had already been cleared for discharge.
Earlier this year, the court dismissed the case on procedural grounds, but not before it issued a ruling that found Anthem in violation of various California insurance laws designed to ensure adequate patient care and prevent bad faith insurance practices. Learn about the case and recent ruling below. If you have been harmed by your insurance company through a wrongful denial of a claim or other illegal mistreatment, contact Gianelli & Morris in Los Angeles to review your situation with an experienced and successful California insurance bad faith lawyer.
What Is This Case About?
California Hospital Association vs. Blue Cross of California, dba Anthem Blue Cross (24STCV10193) was filed on April 23, 2024. In the civil complaint, the CHA accused Anthem of Unfair and Unlawful Business Practices (aka insurance bad faith) under section 17200 of the California Business and Professions Code. Oftentimes, once a patient is discharged from the hospital, they require some level of post-hospital care, such as physical therapy, occupational therapy, speech/language therapy, or medical management so they can recover functionality and return home safely. Such “post-acute” care is typically provided by facilities such as:
- Skilled nursing facilities
- Inpatient rehabilitation facilities
- Behavioral health unit facilities
- Long-term care facilities
- Acute rehabilitation units
- Home health care services
To make sure this post-hospital care is covered by insurance, the insurance company will often communicate with the treating physician and agree on a plan for alternative care before they authorize it.
This process does not always move forward as swiftly as it should. The gist of CHA’s complaint against Anthem is that the insurer has been depriving patients of timely post-hospital healthcare. Patients cleared for discharge have been forced to stay in the hospital while Anthem decides what kind of post-hospital care they will cover. This forces the hospital to prove that care to the patient, at a cost to the hospital (and ultimately the patient). Not only is Anthem forcing patients to stay in the hospital unnecessarily, but they are refusing to cover the post-acute care the hospitals are forced to provide.
This delay also prevents other patients in need of acute care from accessing that care because hospital beds are being needlessly tied up. According to the complaint, 4,500 patients are stuck in California hospitals every day waiting for their insurers to approve and arrange for their discharge to an appropriate care setting. CHA alleges that Anthem has failed to maintain an adequate network of care providers, so the problem is one of Anthem’s own making.
Court Rules Insurers Have a Duty to Arrange for Post-Acute Care
A hearing in the case was held on February 21, 2025, with a decision released a week later on February 27th. The court’s ruling dealt with several motions filed by Anthem to get rid of the case. Ultimately, the court decided not to move forward with the case, although it did go to great lengths in its 24-page ruling to make it clear that health plans are responsible for arranging and transitioning their members to post-acute care services.
As the court pointed out, the California Health and Safety Code section 1367.01(h)(3) clearly prohibits health plans from discontinuing a patient’s hospital care until a post-acute care plan has been agreed to with the treating provider. Even while abstaining from further proceedings in the case, the judge took pains to rule that health plans are responsible for arranging and transitioning members to post-acute care services and should not be discontinuing coverage during that period.
Anthem’s Procedural Maneuvering Keeps the Case From Being Fully Decided
The February ruling addressed Anthem’s multi-prong demurrer to the complaint, which is a legal challenge brought by a defendant alleging the plaintiff’s complaint is legally insufficient for some reason or reasons. In this case, Anthem alleged the CHA failed to plead an unlawful practice on Anthem’s part because the statute cited above (HSC 1367.01) only prohibits providers from discontinuing care while the health plan completes its review of a request for authorization of covered health services. Here the court disagreed. Judge Kenneth Freeman noted that the statute makes clear that care shall not be discontinued until the treating provider has been notified of the plan’s decision and a care plan has been agreed upon by the provider that is appropriate for the medical needs of the patient. “The Court finds section 1367.01(h)(3) applies to health plans like Anthem,” wrote Judge Freeman.
Anthem also demurred on the grounds that CHA failed to plead an unfair practice, arguing that for a practice to be “unfair” requires “substantial” injury to the consumer that is not outweighed by the benefits to consumers or competition, and that consumers could not have reasonably avoided the injury. The court disagreed with Anthem, holding that “unfair” in the statute is intentionally broad to allow courts maximum discretion to prohibit new schemes by companies to defraud consumers.
Anthem further argued it is not a consumer nor a competitor of CHA, so CHA cannot allege an unfair competition law (UCL) claim against it. The judge knocked down this argument as well. The court cited a recent precedent in California Medical Ass’n v. Aetna Health of California, Inc. (2023) where the California Supreme Court ruled the California Medical Association (CMA) had standing to bring a UCL claim against Aetna, even though CMA is not a consumer nor a direct competitor of Aetna. Here, Judge Freeman found the situation between CHA and Anthem to be structurally analogous to the dispute between CMA and Aetna.
Anthem also argued that CHA should not be pursuing injunctive relief and that CHA had no standing to sue because there was no “injury in fact.” The court disposed of these arguments as well, finding the plaintiff’s pleadings were sufficient.
Finally, Anthem succeeded in persuading the court to “equitably abstain” from hearing the case. In the end, the court agreed that if it were to provide the relief requested by the plaintiff, the court would be assuming the functions of an administrative agency, namely the Department of Managed Health Care (DMHC) which is empowered by law to regulate health plans in California under the Knox-Keene Act. The court decided the DMHC has the authority to determine whether Anthem violated Knox-Keene. Since that administrative proceeding would be the more appropriate alternative to resolve the issues in dispute, the court agreed equitable abstention is appropriate. The court granted the demurrer without leave to amend, thereby putting an end to the civil case of CHA v. Anthem.
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Hopefully, this case will send a strong signal to Anthem and other insurance companies that they must maintain an adequate network of post-acute providers, promptly arrange for post-acute care, and continue coverage during the transition from acute care in the hospital to post-acute care in an appropriate setting. As we know, however, even a legal ruling is not always enough to get insurers to change their systems, and sometimes further litigation is required to get an insurance company to fix its practices.
If you find yourself in a dispute with your insurance company over coverage or claim reimbursement and believe the insurer is acting in bad faith, we may be able to help you get the benefits you are entitled to plus additional compensation for any harm you have suffered and punitive damages to hold the insurer fully accountable. Contact Gianelli & Morris in Los Angeles for a free consultation to discuss your potential claim.
