Carelon Behavioral Health Lawsuit: A Challenge for Ghost Networks

By Elena Pak, Credentialing Department, WCH

A federal judge in New York has allowed a major class action lawsuit against Carelon Behavioral Health to proceed, rejecting the company’s motion to dismiss and setting the stage for what plaintiff attorneys describe as the opening wave of a litigation campaign against one of the most entrenched and well-documented failures in American insurance practice. The case accuses Carelon of maintaining a deceptive and inaccurate directory of in-network mental health providers for New York state employees, and the ruling marks a significant legal milestone in the growing national fight against ghost networks in healthcare.

The defendant, Carelon Behavioral Health, is the behavioral health subsidiary of Elevance Health — the insurer formerly known as Anthem and one of the largest managed care organizations in the country. Carelon administers the Empire Plan Mental Health and Substance Use Program under the New York State Health Insurance Program (NYSHIP), the plan for employees of the state, under a successor contract worth $2.8 billion beginning in January 2024 and running through 2028. The contract’s scale matters: the proposed plaintiff class consists of New York state and municipal employees enrolled at any point from 2019 onward, a population potentially exceeding one million covered lives.

What a Ghost Network Actually Is — and How This One Was Built

A ghost network is not an administrative error. It is a provider directory that systematically lists clinicians as available, in-network, and accepting new patients when they are not. The mechanism by which it persists is a combination of structural incentive and operational neglect: insurers benefit from appearing to offer broad access to behavioral health services when negotiating contracts with employers and government purchasers, but face no real-time accountability for whether that appearance reflects reality.

The lawsuit was filed in April 2025 after attorneys representing the plaintiffs conducted a “secret shopper” survey, calling 300 Carelon providers who were reportedly accepting new patients and covered under the plaintiffs’ insurance — the Empire Plan in NYSHIP. Carelon is accused of publishing an inaccurate directory of providers for those seeking mental health services, allegedly inflating the available number of eligible providers to make it seem like those with specific insurance had more options than actually existed, in order to entice employers and health plans into adding its organization to their coverage networks.

The survey methodology is significant. This was not anecdote-driven litigation — it was evidence gathered through systematic audit, designed to withstand a motion to dismiss. Research shows that 40–80% of behavioral health providers listed in insurance directories are unreachable or unavailable, a problem particularly severe in behavioral health compared to medical networks, reflecting long-standing inequities in access and enforcement. The Carelon case is not an outlier. It is an instance of a documented industry-wide pattern being litigated for the first time at scale.

Three Lawsuits in Under a Year — and a Pattern Emerging

The Carelon case does not stand alone. This marks the third class action filed in under a year against Carelon, Elevance, and Anthem over ghost networks. The latest of the three alleges that the companies intentionally published an inaccurate provider directory where over 70% of doctors listed do not exist, do not have accurate contact information, or are not actually in-network.

The earlier cases illuminate both the scope of the problem and the limits of the current legal framework. Federal employees with Anthem BCBS coverage filed a lawsuit in October 2024 in the same court, alleging that the plan maintained ghost mental health provider networks. That case was dismissed in March 2026 after the judge ruled that, because the plan covered federal employees, federal law governed the dispute, thereby blocking the state-law claims. The dismissal was not a vindication of Anthem’s conduct — it was a jurisdictional ruling that exposed a gap in the federal enforcement architecture. State consumer protection law, which has more plaintiff-friendly standards for fraud and deception claims, cannot reach plans governed exclusively by ERISA or federal employee benefit statutes.

The surviving New York case — the Carelon-NYSHIP lawsuit — proceeds under state law precisely because the plan covers state and municipal employees, not federal workers. Judge Edgardo Ramos of the Southern District of New York rejected Elevance’s motion to dismiss, allowing the plaintiffs’ claims of false advertising and deception to proceed. The legal distinction is narrow, but the implications are significant: this is the case that may ultimately force discovery into how Carelon constructs and maintains its provider directories, what internal data it holds about provider availability, and whether the discrepancy between listed and actual network access is known and managed rather than inadvertent.

Why Behavioral Health Is the Worst-Affected Sector

Ghost networks exist across insurance products, but behavioral health is structurally the most vulnerable segment. As plaintiff attorney Steve Cohen noted, “Behavioral health is among the very worst of the ghost network problems. Because there’s a large demand for it and most of mental health wasn’t covered until the Parity Act, so insurance companies didn’t have long-standing relationships with large networks of doctors.” The consequence is that behavioral health networks were assembled late, have never been as tightly integrated with insurer infrastructure as medical networks, and suffer from chronically low reimbursement rates that drive provider attrition.

Ghost networks often exist due to a combination of factors, including patients with mental health issues being reluctant to complain about poor network access to their employers or regulators — which may be why some insurers have not felt it necessary to increase reimbursement for mental health providers despite the dramatic increase in demand for mental health treatment over the last few years. The silence of the affected population, in other words, has historically insulated insurers from accountability. Litigation changes that calculus.

The Regulatory Context: Parity Enforcement in Reverse

The Carelon lawsuit arrives at a moment of acute tension in federal mental health policy. The 2024 Final Rule under the Mental Health Parity and Addiction Equity Act was intended to fundamentally strengthen oversight of how insurers manage behavioral health benefits relative to medical benefits. As of May 2025, the Departments of Health and Human Services, Labor, and Treasury announced a non-enforcement policy for portions of the rule slated to take effect in 2025, citing ongoing legal challenges. The practical effect is that insurers retain broad discretion in setting coverage limits and utilization management for behavioral health services, with limited federal consequence.

The Trump administration’s 2025 parity report to Congress underscored the shift. The report ran just 32 pages compared to 142 pages for the 2024 report, with limited discussion of enforcement priorities and no requests for additional enforcement authority or resources — a notably different posture from prior years. Federal enforcement has not disappeared, but its institutional momentum has slowed precisely when the case for it has grown stronger.

Into that vacuum, state regulators and private litigants are moving. Even as the Trump administration declines to enforce key provisions of the 2024 federal rule, states retain primary authority over insurance regulation. Several states have embedded the 2024 federal rule into state law — Washington enacted legislation requiring insurers to comply with it as published, and Colorado used the rule to strengthen its own statutory protections. The Carelon case is part of this same dynamic: where federal enforcement retreats, litigation advances.

The Structural Implication

Ghost networks are not a compliance failure amenable to a targeted fix. They are the operational expression of a business model in which network breadth is a marketing asset rather than a service commitment — where the directory is the product sold to employers and purchasers, and the actual availability of care is a secondary consideration. As long as the cost of maintaining an inaccurate directory is lower than the revenue it generates, the incentive structure remains intact.

Litigation is beginning to alter that calculus. If the Carelon case reaches discovery, the industry’s internal documentation practices around provider directory accuracy will become visible in a way that regulatory audits have never forced. Plaintiff attorneys anticipate that the wave of ghost network lawsuits is just beginning, with awareness of the problem growing and more patients willing to come forward. For insurers managing large behavioral health networks, the question is no longer whether directory accuracy will be scrutinized — it is whether the scrutiny arrives through a regulator or a jury.

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