- The city of San Diego is suing three major insurers for false advertising, alleging that they failed to maintain accurate provider directories, misleading consumers with the so-called "ghost networks" that are illegal under state and federal law.
- On Thursday, City Attorney Mara Elliott filed the complaints against Kaiser Permanente, Molina and HealthNet, a subsidiary of Centene, in San Diego Superior Court. Together, the insurers cover more than 3 million people across the state.
- Provider directories are a key resource for consumers when picking an insurance plan, helping them determine which doctors are in-network and what specialists are available in their area. According to the lawsuits, HealthNet, Kaiser and Molina's directories had overall error rates of 18%, 19% and a whopping 58% respectively in 2019, despite California law requiring such lists be accurate and up-to-date.
Ghost networks, provider directories that list out-of-network physicians as in-network, cause consumers to think their coverage is more comprehensive than it actually is and can make access to care more difficult, the complaints allege. Despite laws prohibiting the practice, insurers have a clear financial incentive to artificially inflate their networks to attract more potential enrollees and nudge consumers to pay more to access what they perceive to be a broader network of medical providers.
Network size and premium price are particularly important when choosing a plan in California. Because the state mandates standard benefit packages for all plans, the only characteristics that plans compete on are network and premiums.
Additionally, high-need enrollees who require more pricey, specialized care might get frustrated with the lack of coverage and leave the narrow plan, weeding out the insurer's most expensive beneficiaries, San Diego argued. These factors make it harder for competitors.
"These consumers are left exasperated by fruitless hours spent trying to find an in-network provider taking new patients and are haunted by out-of-network provider charges," the complaint against HealthNet says. "Some consumers will delay care or even forgo care entirely because of ghost networks, harming not only those consumers but also the broader public health."
California law requires insurers to update their printed provider directories at least once a quarter, and their online listings on a weekly basis. Directories need to include providers' location, contact information, specialty, medical group, institutional affiliation and whether they're accepting new patients. Additionally, California law explicitly prohibits directories from including information on a provider not currently under contract with the plan.
Kaiser, Molina and HealthNet are among the worst actors in California when it comes to publishing accurate provider networks, San Diego said in the complaints accusing the three payers of violating state and federal laws around false advertising and unfair competition.
Additionally, the payers were aware the listings were incorrect. The lawsuits point to access data that Kaiser, Molina and HealthNet submitted to the California Department of Managed Care highlighting inaccuracies in the published networks. Kaiser's failure is "particularly problematic," the lawsuit said, as the integrated delivery network employs its clinicians in-house.
Overall error rates in the directories were high, but become much steeper when it comes to mental health professionals, often some of the priciest and most difficult-to-find specialists.
In 2019, the latest year data is available, HealthNet's inaccuracy rate was 35% for psychiatrists. The Los Angeles-based payer's error rates in 2018 were even worse, at almost 29% overall and 53% for psychiatrists.
Kaiser's mental healthcare directory's error rate was more than 30%. In 2018, the nonprofit giant's overall inaccuracy rate was 28% and its mental health error rate was 32%.
Molina's error rate was the most egregious for both years. In 2019, the payer had an overall inaccuracy rate of 58% and a "truly staggering" inaccuracy rate of 83% for psychiatrists, the lawsuit found, with similar rates in 2018 as well.
Along with people attempting to access mental health services, the complaints said the insurers' practices disproportionately affected low-income enrollees, who are more likely to be Black or Hispanic, along with people with disabilities, seniors with low digital literacy and women.
The three insurers have run into trouble for these practices before.
In 2014, HealthNet was sued by some of its enrollees for misrepresenting its networks. Similarly, in 2017, another Centene HealthNet subsidiary was fined $1.5 million by Washington state following consumer complaints about inadequate networks. And, in 2019, Centene's Oregon subsidiary was sued by a hospital system for falsely representing it as in-network.
Also in 2019, Washington state separately fined the state's Kaiser affiliate and the state's Molina affiliate $600,000 each for an inaccurate provider directory. San Diego also noted in its suit against Kaiser that it had admonished the payer "for decades" for limited access to mental health providers, and had cited Kaiser five times since 2005 for failing to provide timely access to mental healthcare.
Along with cessation of the alleged practices, San Diego is seeking $2,500 from each insurer for every violation of false advertising and unfair competition laws, along with an additional civil penalty of $2,500 for every violation against seniors and people with disabilities.
Kaiser, Molina and HealthNet did not respond to repeated requests for comment by time of publication.