The city of San Diego sued three health insurers on Friday, alleging Kaiser Permanente, HealthNet and Molina Healthcare all advertised false networks of providers in an attempt to get consumers to sign up for their plans.
The three insurers together enrolled more than 3.3 million California residents in 2019, and “are among the worst actors in California when it comes to the inaccuracy of their provider networks,” according to the three separate suits, all filed in San Diego Superior Court.
HealthNet, which is a subsidiary of Centene Corp., has 2.3 million residents across the state, the complaint said. Molina Healthcare counts nearly 1 million California enrollees, according to the lawsuit. The city attorney did not name how many beneficiaries were enrolled in Kaiser Permanente plans. Each complaint accuses the insurers of violating state and federal laws around unfair competition and false advertising.
“Consumers should be able to trust their health insurers when seeking medical attention,” San Diego City Attorney Mara Elliot said in a statement. “Error-filled directories create dangerous barriers to healthcare services, with patients struggling to find a directory-listed doctor who will accept their insurance.” California law requires health insurers to update their printed provider directories quarterly and online listings weekly, the complaint said. These payers knew they were advertising false networks, with lawsuits pointing to annual data submitted by the insurers to the California Department of Managed Care that highlighted inaccuracies in the networks marketed.
The complaints allege that up to 35% of the providers in Kaiser Permanente and HealthNet’s directories were listed inaccurately, and 80% of clinicians in Molina Healthcare’s directory were falsely listed as in-network. Each lawsuit calls out insurers’ false listings of psychiatrists in particular, which were inaccurately advertised at much higher rates than other types of clinicians. In 2020, California enacted a regulation that requires plans to arrange for out-of-network coverage for mental health services for enrollees when in-network services are not available.
“Consumers are left exasperated by fruitless hours spent trying to find an in-network provider taking new patients, and haunted by out-of-network provider charges,” the complaints read. “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.”
Insurers’ error-riddled provider directories allowed them to attract more prospective enrollees and command higher prices, according to the suit. The lawsuit cited a 2020 study in the Journal of Managed Care, which found that consumers are willing to pay a higher monthly premium to have their doctor in-network and for better access to doctors in their area. Once enrolled, members who required more expensive, specialized care may also have grown frustrated with the lack of available coverage and left the plan for a competitor, effectively weeding out the provider’s most expensive enrollees, according to the lawsuit. Falsely inflating their network size also made it harder for competitors to compete in the marketplace, the complaint said.
Kaiser Permanente’s failure to accurately list its provider network is particularly egregious since the integrated delivery network employs its clinicians in-house, according to the lawsuit. But each complaint said that insurers’ inaccurate listings disproportionately impacted low-income enrollees—who were more likely to be Black or Hispanic, according to the lawsuit—individuals with disabilities, people seeking mental healthcare, seniors lacking digital literacy and women.
Each complaint noted that this was not the first warning insurers received. In 2019, California officials fined HealthNet in 2019 for “surreptitiously” including out-of-network providers in its directory, the complaint said. That same year, the lawsuit said Washington officials issued Molina Healthcare a $600,000 fine for misstating its provider network. And California officials have admonished Kaiser Permanente “for decades” about its limited number of mental health professionals and the barriers it imposes on consumers who seek care, according to a complaint.
Attorneys seek $2,500 for every violation of unfair competition and false advertising laws by each insurer, along with a civil penalty of $2,500 for every violation of these laws perpetrated against seniors and those with disabilities. The city also seeks to stop insurers from false advertising in their provider networks, and any other relief the court deems appropriate.
HealthNet, Molina Healthcare and Kaiser Permanente did not immediately respond to interview requests.