Elevance Health Faces Lawsuit Over Controversial Physician Policy

By Elena Pak, Credentialing Department, WCH

Elevance Health, the parent company of Anthem Blue Cross Blue Shield, is facing another lawsuit over a policy that penalizes in-network hospitals and ambulatory surgery centers when out-of-network physicians treat Anthem commercial members at those facilities for certain planned procedures. On September 17, the Neurological Surgery Practice of Long Island filed a complaint in federal court in New York, targeting a policy that expanded into the state in July 2026. It is not the first legal challenge to the policy, and it adds to growing opposition from hospitals, physician groups and state lawmakers. The dispute raises a broader question about who controls which physicians can participate in care at an in-network facility.

What Elevance Is Doing

Starting January 1, 2026, Elevance implemented the policy across 11 states for its Anthem Blue Cross Blue Shield commercial plans. Elevance has since described the 10% penalty as applying in at least 12 states. The policy later expanded to New York, where the September lawsuit cites a lower 7.5% reduction, and to California.

Under the rule, in-network hospitals and ASCs where an out-of-network physician treats a commercial member — even in planned, non-emergency settings — face an administrative penalty on the allowed amount for those claims, with the threat of network termination for repeat use.

The policy carves out several exceptions: emergency services, cases where Anthem pre-approved a nonparticipating provider, situations where no in-network provider is available in the area, and rural, critical-access and safety-net hospitals.

Hospitals may not directly employ or contract with every physician involved in a procedure. Anesthesiologists, radiologists, emergency physicians and pathologists, for example, often work through independent physician groups that bill separately from the facility — meaning a hospital can be fully in-network while an independent specialist involved in a procedure remains out of network.

Indiana subsequently enacted legislation prohibiting insurers from penalizing hospitals for out-of-network care provided at their facilities. The law is particularly notable because Elevance is headquartered in Indianapolis and controls approximately 68% of the state’s commercial insurance market, according to the Indiana Hospital Association.

Why Elevance Says It’s Doing This

Elevance said the policy is intended to protect members from unnecessary out-of-network costs. The company also cited concerns about the use of the No Surprises Act’s independent dispute resolution (IDR) process. “The policy also addresses inappropriate use of the No Surprises Act’s dispute resolution process, which can increase healthcare costs and premiums,” Elevance told Becker’s on September 18.

That argument sits against a backdrop of rapidly rising IDR activity. A Georgetown University analysis published in Health Affairs Forefront in August estimated the IDR process has generated roughly $22.4 billion in total costs since 2022, including $15.6 billion in payment awards exceeding in-network benchmark rates, plus administrative costs for plans and providers. Dispute volume rose 77% from 2024 to 2025, with providers initiating 2.6 million disputes last year — far beyond federal regulators’ original projection of about 22,000 disputes annually. The data also show IDR activity has become highly concentrated: three organizations — Radiology Partners, HaloMD and TeamHealth — accounted for more than three-quarters of resolved dispute lines in 2025.

Providers prevailed in roughly 85% of disputes in 2025. One arbitration entity ruled for providers in 99.4% of cases, with a median award equal to 601% of the benchmark payment rate. Across the IDR system, the median prevailing award was 445% of the qualifying payment amount (QPA). At the 90th percentile, awards reached 1,771% of the QPA — nearly 18 times the benchmark, up from 1,226% in 2024.

Elevance says the policy is intended to reduce its exposure to that process by limiting out-of-network encounters at the point of care rather than through arbitration itself. That causal chain — fewer out-of-network encounters leading to fewer disputes and lower premiums — remains the company’s stated position rather than a demonstrated outcome.

Why Hospitals and Physicians Are Challenging the Policy

The September 17 lawsuit alleges that Anthem’s policy does not target unlawful balance billing or patient complaints, but instead penalizes the use of nonparticipating physicians regardless of whether they complied with the No Surprises Act, honored the balance-billing prohibition, and used the federal IDR process as intended. The complaint also alleges that Elevance is a dominant commercial payer and a “must-have” buyer of hospital facility services in the New York metropolitan area, allegations that form part of the plaintiffs’ antitrust theory. Court filings represent one party’s allegations and have not been tested or ruled on.

This is the second major legal challenge to the policy in 2026. In May, the California Hospital Association sued Anthem Blue Cross over the same mechanism, with CHA President and CEO Carmela Coyle arguing the policy shifts Anthem’s own network-management problems onto hospitals that CHA says are already under financial strain.

Specialty physician groups — including the American Society of Anesthesiologists, the American College of Emergency Physicians and the American College of Radiology — have urged Elevance to abandon the policy, calling it “deeply flawed and operationally unworkable.” Brian Gantwerker, MD, a spine surgeon at the Craniospinal Center of Los Angeles, called it “very anti-competitive behavior from an already embattled insurer” and predicted it could lead some physicians to drop Blue Cross coverage, potentially forcing hospitals to hire additional physicians or absorb higher costs to stay compliant.

Provider groups and the new lawsuit argue that the policy uses Elevance’s market leverage to pressure independent physicians toward its networks without directly renegotiating contracts with them.

What Remains Unresolved

The No Surprises Act was designed to protect patients from certain unexpected out-of-network bills, including those tied to emergency and facility-based care. It did not resolve how insurers and providers settle payment disputes behind the scenes — that’s the job of the IDR process, which Georgetown researchers describe as having grown into a multibillion-dollar federal arbitration process far larger than regulators anticipated.

Hospitals, physician groups and the plaintiffs in the two pending lawsuits argue that Elevance’s approach shifts financial and legal risk onto facilities that don’t always control which physicians treat their patients.

The broader concern is who ultimately bears the cost of rising IDR payments and reimbursement disputes. Georgetown researchers warn that, without legislative changes, escalating IDR costs could contribute to higher premiums, increased patient cost-sharing, narrower provider networks and slower wage growth — effects tied to the IDR system generally, not to Elevance’s policy specifically. The outcome of the pending lawsuits, along with Indiana’s legislative response, could influence how other major insurers approach out-of-network physician arrangements at in-network facilities going forward.

For healthcare organizations, payer policy changes like this can have implications beyond contracting — affecting reimbursement, revenue integrity and financial planning. WCH works with healthcare providers on payer analysis, revenue integrity and reimbursement strategy, helping organizations understand how changing payer policies may affect their financial performance.

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