How providers are responding to Elevance’s out-of-network policy

By Caroline Hudson / May 19, 2026

Elevance Health is expanding a policy that penalizes hospitals making out-of-network referrals — and providers aren’t having it.

Hospital associations say the insurer’s policy, which applies to Elevance’s Anthem Blue Cross Blue Shield commercial plans, is another attempt to shortchange hospitals. The insurer argues the policy will help control rising care costs and limit exorbitant reimbursement requests.

In January, the policy took effect in Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, Ohio and Wisconsin. The insurer is looking to expand it to California June 1 and New York July 1.

Here’s what to know about the policy and how providers and states are pushing back.

What is the policy?

Hospitals and other facilities that refer Anthem members to out-of-network clinicians are facing administrative penalties on those claims, typically equivalent to 10% of the allowed amounts. New York hospitals are facing a 7.5% pay reduction due to a state insurance law that caps penalties for failing to follow administrative requirements agreed upon by hospitals and insurers.

Providers cannot pass the penalties on to patients. In some cases, Elevance said it may terminate a hospital’s contract with Anthem.

There are exclusions for emergency care as well as for rural, critical access and safety-net hospitals.

How are providers and states responding?

States and trade groups representing hospitals and health systems are criticizing the policy.

The American Hospital Association, which sent a letter of disapproval to Elevance Health CEO Gail Boudreaux in December, is questioning the insurer’s motives.

“Put bluntly, Anthem failed to secure adequate contracts with independent physician groups and is now shifting the financial consequences onto hospitals,” said Noah Isserman, the group’s director of health insurance and coverage policy, in a statement.

Providers in Indiana, in addition to the Indiana Hospital Association and the Indiana State Medical Association, successfully urged legislators to block the policy.

Indiana Gov. Mike Braun (R) signed legislation in March blocking insurers from penalizing providers for making out-of-network referrals, effectively shutting down the policy in Elevance’s home state.

Indiana Hospital Association President Scott Tittle said the policy would’ve driven up care costs by preventing access to independent physicians. “It’s hard to see how any savings would’ve been achieved,” Tittle said. “If anything, it’s incredibly self-serving for Anthem.”

He said other states have expressed interest in how Indiana responded with legislation.

Greater New York Hospital Association President Kenneth Raske described the change as the “latest shenanigan” from insurers. “This is a classic ‘blame the victim’ issue,” Raske said. “Is the hospital supposed to call the consumer and say, ‘Guess what? You have to get another physician.’”

More than a dozen health systems did not respond to a request for comment or deferred comment to hospital associations.

What’s happening in California?

California is the first state to fight the policy in court. The California Hospital Association filed a complaint May 4 in the state’s Superior Court of Los Angeles County against Anthem. The association alleges the policy would force hospitals to break a state law that prohibits them from employing providers based on insurance contracts. It also alleges the policy constitutes false advertising for Anthem’s preferred provider organization coverage, which covers a portion of out-of-network visits.

“We either incur this 10% penalty if we follow the law … or we’re being asked to essentially break the law by telling the physician, ‘Sorry, we can’t give you privileges because you’re not an Anthem physician.’” said Erika Frank, legal counsel at the California Hospital Association.

What does Elevance say?

An Elevance spokesperson said the company plans to actively defend itself against the California lawsuit.

Ariel Bayewitz, head of health economics at Elevance, said the policy is meant to protect employer-sponsored plans, and ultimately patients, from rising care costs.

Bayewitz said the rising costs stem from the No Surprises Act’s Independent Dispute Resolution process, through which Elevance has been saddled with claims for reimbursements well above market rates. Most of the claim dollars go toward planned elective procedures, not surprise bills, he said.

“It just continues to accelerate well beyond where federal agencies thought we would be,” Bayewitz said. “The policy is not about penalizing hospitals. It really is about shared accountability in instances where participating facilities are repeatedly used as basically the conduit for … out-of-network billing.”

Bayewitz said Elevance is trying to limit the administrative burden on providers by sharing lists of out-of-network clinicians practicing at certain facilities.

He said the best solution is legislative action that clarifies what qualifies for the dispute resolution process.