Facts of Class Rep

Facts of Class Rep                              CalPERS and Anthem’s Standardized Representations

Definition of Allowable Amount              Fairhealth.org

Facts of Class Representative Brad Heinz

In standardized publications and on its website, CalPERS offered a choice of differing health plans, including three PPO options (PERSCare, PERSChoice, PERSSelect, etc.) and managed care options. Exhibits 24-27, 28, 41-53, 55. CalPERS’ and Anthem’s standardized promotional material present the PPO coverage as consistent with industry standards for reasonable reimbursement for “out-of-network” medical expenses. Id. CalPERS and Anthem used standardized non-negotiable form contracts to promote and to transact the PPO insurance coverage. Exhibits 39-40. Each purchaser signed a standardized enrollment form to get PPO coverage. Exhibits 39-40.

After contracting for PPO coverage by standardized forms, another standardized form contract arises—the evidence of coverage (EOC)— between CalPERS and each proposed class member.[1] CalPERS and Anthem do not regularly distribute the EOC to each purchaser. The EOC is available upon request. Contractually, the EOC governs a health plan’s obligations to its members and their dependents. (See Watanabe v. California Physicians Service (2008) 169 Cal.App.4th 56, 67.)[2] Payment for nonemergency services provided by “out-of-network” providers is governed by the EOC. (Cal. Code Regs., tit. 28, § 1300.71(a)(3)(C) [3] For example, the three subpart definition of “Allowable Amount” and the examples in EOC indicate that the “Allowable Amount” would be the same or similar whether one used a PPO doctor or a non-PPO doctor. The EOCs are attached as Exhibits 24-26, 28, 41-45.

Statement of Facts

From January 1, 2006 through December 31, 2008, Heinz was enrolled in the “PERSCare PPO” plan. Exhibits 27, 39-40.

From January 1, 2009 through December 31, 2014, Heinz was enrolled in the “PERSChoice PPO” plan. Exhibits 27, 29-32, 34, 36, 38-40.

Both PERSCare and PERSChoice are CalPERS PPO plans administered by Anthem. Exhibits 27, 29-32, 34, 36, 38-40.

Heinz has seen a medical doctor, Joe A. Walker, M.D. (“Dr. Walker”), for non-emergency medical services in San Francisco on a regular basis from at least 2006 to 2015. Exhibits 27, 29-32, 34, 36, 38.

Before May 2008, Dr. Walker was a member of the Physicians Foundation Medical Group (“Physicians Foundation”) under contract with Anthem as a Preferred Provider (“PP”). Exhibits 14, 23. As of April 2008, Dr. Walker billed $420 for a 50-minute visit, his standard billing rate for such services. Anthem approved a “contract” payment rate to Dr. Walker of $299.97 per visit. Exhibits 14, 23, 54.

In other words, when in-network, Anthem and CalPERS calculated a contract rate or “Allowable Amount” for Dr. Walker at $299.97 per visit. Anthem specifically recognized this: “The member has seen this same Doctor under a different PPO Tax ID # & the Contracted rate was $299.57.” Exhibit 14, page 3.

Pursuant to Heinz’s Anthem contract, Anthem paid 80% of the contract rate or “Allowable Amount” (80% of $299.97 is approximately $239.65), and then Heinz was billed for and paid the remaining 20% (approximately $60). Exhibit 27

CalPERS’ and Anthem’s hidden policy and practice of providing unreasonably low reimbursement rates or “Allowable Amounts” for “out-of-network” medical expenses was only discovered by chance in that Dr. Walker went from “in-network” to “out-of-network” in May 2008. During this whole period of 2006 to 2014, Dr. Walker provided the same services to Mr. Heinz in the same location, i.e. both before and after going “out-of-network”. Exhibits 27, 29-32, 34, 36, 38, 54.

Specifically, beginning in or about May 2008, Dr. Walker terminated his relationship with Physicians’ Foundation, thus choosing to no longer be a contracting Preferred Provider (“PP”) physician with the Anthem plans. Instead, he was deemed a Non-Preferred Provider (“NPP”) physician (i.e. “out-of-network”). Dr. Walker continued his “Billed Rate” at $420 per visit just as he had done while a PP. Dr. Walker agreed to continue to provide medical services to Heinz as an NPP physician, but insisted on a minimum payment of $250 per visit. Dr. Walker required Mr. Heinz to pay the $250 fee for each session on a monthly basis and then Mr. Heinz would seek reimbursement by submitting the claims to Anthem. Later, Dr. Walker increased this minimum fee to $275 per visit. Exhibits 14, 23, 54.

Monthly, Heinz paid Dr. Walker as an NPP (i.e. “out-of-network”) provider the full minimum payment ($250 per visit, and later $275 per visit) and then timely sought reimbursement from Anthem. Exhibits 27, 29-32, 34, 36, 38, 54.

Pursuant to the express terms of the PPO coverage, Heinz understood that he would be paying a higher percentage of the “Allowable Amount” (increasing from 20% to 40%), and Anthem would be paying a lower percentage (decreasing from 80% to 60%) of the “Allowable Amount” because Dr. Walker was now “out-of-network.” Exhibits 3-23. Specifically, Heinz expected that Anthem would only pay 60% of the “Allowable Amount,” and Heinz would be responsible for paying the remaining 40% of the “Allowable Amount,” because Dr. Walker was now an NPP.

Heinz also expected that Anthem would not substantially change the calculation of the “Allowable Amount” for Dr. Walker’s services. Exhibit 3-23, 54. The services had not changed. Exhibits 27, 29-32, 34, 36, 38, 54. Heinz expected that Anthem would calculate the “Allowable Amount” at or near (1) the prior “contract rate” or (2) the usual, customary, or reasonable rate for similar medical services in the community (which both should be substantially the same amount because Anthem could only agree to contract with Dr. Walker at or near a UCR rate[4], including because a higher rate would be an unlawful gift of CalPERS’ “public trust funds”). Exhibit 3-23, 54. Dr. Walker continued to bill at the rate of $420 per visit just as he had done while a PP.

Heinz timely and appropriately presented the claims to Anthem, which accepted the medical expenses under the PPO coverage. Exhibits 27, 29-32, 34, 36, 38.

The dispute is about the appropriate “Allowable Amount” and the amount of reimbursement. (The validity of the claims is not at issue. CalPERS and Anthem accepted and paid the claims).

After Dr. Walker became an NPP physician, Anthem significantly reduced the “Allowable Amount” for Dr. Walker for the same services he had previously provided as a PP.

From $299.97[5] per visit, Anthem and CalPERS reduced the “Allowable Amount” to a range between $136.86 to a low of $76.91, i.e., which is equal to 45.6% to as little as 25.6% of the “Allowable Amount” that Anthem previously calculated. Exhibits 27, 29-32, 34, 36, 38.

CalPERS and Anthem calculated the “out-of-network” “Allowable Amount” from May 2008 to December 31, 2010 at $113.31 per visit. Exhibit 23.

CalPERS and Anthem calculated the “Allowable Amount” from January 1, 2010 to July 31, 2011 at $128.41 per visit. Exhibit 23.

CalPERS and Anthem calculated the “Allowable Amount” from August 1, 2011 to November 22, 2013 at $76.91 per visit. Exhibit 23.

CalPERS and Anthem calculated the “Allowable Amount” from May 3, 2013 to December 31, 2014 at $136.86 per visit. Exhibit 23.

Moreover, CalPERS and Anthem represented in writing that the “Allowable Amount” for 2010 would be $228.41 per visit, but never paid this amount.[6] Exhibit 3, page 2. With no notice of reconsideration or change, CalPERS and Anthem simply failed to reimburse Heinz at that higher rate. Exhibits 27, 29-32, 34, 36, 38.

For example, under the “Allowable Amount” rate of $136.86 per visit from 05/03/13 to 08/29/14, (i) Heinz was required to pay Dr. Walker’s minimum fee of $275 in full; (ii) Anthem then offered to reimburse Heinz for 60% of the “Allowable Amount” of $136.86 (Anthem reimbursed approximately $82.12); (iii) leaving Heinz responsible for paying both the 40% of the “Allowable Amount” (approximately ($54.74) plus an additional $138.14 (the difference between Dr. Walker’s minimum $275 charge and the $136.86 allowable rate), for a total out-of-pocket cost to Heinz of $192.88. Exhibit 23, 34, 36, 38, 54.

Under the “Allowable Amount” rate of only $76.91 per visit from 10/06/11 to 11/22/13, (i) Heinz was required to pay Dr. Walker’s minimum fee of $275 in full; (ii) Anthem then offered to reimburse Heinz for 60% of the “Allowable Amount” of $76.91 (Anthem reimbursed approximately $46.15); (iii) leaving Heinz responsible for paying both the 40% of the “Allowable Amount” (approximately ($30.76) plus an additional $198.09 (the difference between Dr. Walker’s minimum $275 charge and the $76.91 allowable rate), for a total out-of-pocket cost to Heinz of $229.85. The cost was $46.15 for Anthem. Exhibits 23, 32, 34, 36, 54.

Even though Anthem represented that it would pay 60% of the “out-of-network” costs under the PPO coverage, CalPERS and/or Anthem manipulate the rate of the “Allowable Amount” to greatly reduce the actual reimbursement to policyholders, in an unconscionable, substantively unfair manner that breaches their contract and obligations, including to those to whom they owed a fundamental duty.

Specifically, between 2008 to 2010, CalPERS and Anthem paid an “Allowable Amount” of $113.31 instead of $ 299.57, for an underpayment for each service visit (before applying the Plaintiff’s forty percent (40%) co-pay) of about $186.26. The “Allowable Amount” in 2008 to 2010 was calculated at 37.8% of the contracted rate or “Allowable Amount” when Dr. Walker was “in plan.” Exhibits 14, 23, 27, 29, 30, 31.

Specifically, in 2010 to July 2011, CalPERS and Anthem paid an “Allowable Amount” of $128.41 instead of $ 299.57, for an underpayment for each service visit (before applying the Plaintiff’s forty percent (40%) co-pay) of about $171.16. The “Allowable Amount” in 2010 to July 2011 was calculated at 42.8% of the contracted rate or “Allowable Amount” when Dr. Walker was “in plan.” Exhibit 23, 29, 30, 31, 54.

Specifically, in August 2011 to November 2013, CalPERS and Anthem paid an “Allowable Amount” of $76.91 instead of $ 299.57, for an underpayment for each service visit (before applying the Plaintiff’s forty percent (40%) co-pay) of about $222.66. The “Allowable Amount” from August 2011 to November 2013 was calculated at 25.6% of the contracted rate or “Allowable Amount” when Dr. Walker was “in plan.” (This large and unexplained further reduction in the “Allowable Amount” occurred after Heinz filed a grievance.) Exhibits 23, 32, 34, 36, 38, 54.

Specifically, in December 2013 through 2014, CalPERS and Anthem paid an “Allowable Amount” of $136.88 instead of $299.57, for an underpayment for each service visit (before applying the Plaintiff’s forty percent (40%) co-pay) of about $162.69. The “Allowable Amount” from December 2013 through 2014 was calculated at 45.6% of the contracted rate or “Allowable Amount” when Dr. Walker was “in plan.” Exhibits 23, 34, 36, 38, 54.

When Dr. Walker was a Preferred Provider under the Anthem plan, providing the exact same medical services in the same medical provider market, Heinz was only responsible for paying approximately $60 per visit.

When Dr. Walker was out of plan, by a combination of (i) the greatly reduced “Allowable Amount” and (ii) the higher percentage of co-pay (which was dependent on and a percentage of the “Allowable Amount”), Heinz was responsible for paying between $222.66 and $171.16 per service visit.

CalPERS’ and Anthem’s great reduction and recalculation of the “Allowable Amount” on “out-of-network” services is responsible for all of the inappropriate increased costs that CalPERS and Anthem wrongly caused Heinz and the class to bear.

Using the benchmarks for reimbursement on FairHealth.org, CalPERS’ and Anthem’s reimbursement rates for non-emergency “out-of-network” medical expenses are substantially below industry benchmark and substantially below the usual, customary, and reasonable rates. Exhibit 61.

More specifically, using FairHealth.org as a readily available benchmark for more proper reimbursement rates for the services that Heinz received, FairHealth.org supports that the “Allowable Amount” for a 45 to 55 minute session of Dr. Walker’s services was $200 in Heinz’s zip code. Under FairHealth.org, the estimated UCR charge for cognitive services (90837) in San Francisco was two hundred dollars ($200.00) per session. Under FairHealth.org, the Medicare baseline reimbursement was two hundred dollars ($200.00) per session. Exhibit 61. CalPERS and Anthem instead used an “Allowable Amount” of between $136 and $76 dollars. Exhibits 3- 23, 27, 28-32, 34-, 36, 38, 54.

By artificially reducing the “Allowable Amount,” CalPERS and Anthem forced Heinz to pay much more, with the result that Anthem and CalPERS unlawfully paid much less.

  [1] The proposed class members are likely also third party beneficiaries of the contract between CalPERS and Anthem Blue Cross.

  [2] If the Department of Managed Care or Department of Insurance (DOI) has jurisdiction or authority over CalPERS and Anthem, then the EOC’s contents are specifically regulated. (Cal. Code Regs., tit. 28, §1300.63.1.) Even if these departments do not have authority, their regulations are relevant to determining custom and reasonableness in state insurance contracts, including PersCare, PERSChoice, and the PERSSelect plans.

  [3] “For non-emergency services provided by non-contracted providers to PPO and POS enrollees: the amount set forth in the enrollee’s Evidence of Coverage.” Cal. Code Regs., tit. 28, § 1300.71(a)(3)(C).

[4] Anthem could not contract with Dr Walker at a rate less than the UCR rate. See infra.

  [5] At one time, the rate was $320 a visit.

   [6] CalPERS and Anthem should also be estopped, equitably and otherwise, from reducing the reimbursement rates and or “Allowable Amounts” to less that the highest that it represented, i.e. they represented that the “Allowable Amount in 2010” would be $228.41. Exhibit 3, p. 2.