A newly filed lawsuit in Los Angeles County Superior Court alleges that Anthem Blue Cross Life and Health Insurance Company wrongfully denied coverage for a stem cell transplant sought by a young woman diagnosed with multiple sclerosis (MS). The case, filed September 2, 2025, by the Los Angeles-based law firm Gianelli & Morris, highlights ongoing disputes over how insurers handle coverage for emerging but medically supported therapies.

Plaintiff Callie McKay was diagnosed with multiple sclerosis in 2018. By mid-2024, MRI scans showed worsening disease progression, including new lesions on her brain and cervical spine. According to the complaint, her treating physician, Dr. Richard Burt, a recognized expert in hematopoietic stem cell transplantation (HSCT) for autoimmune diseases, recommended HSCT as the best available treatment. Unlike standard MS therapies that aim to slow disease progression, HSCT has been shown in clinical trials to halt progression and even reverse disability in some patients.

The lawsuit notes that both the American Society for Blood and Marrow Transplantation and the European Society for Blood and Marrow Transplantation have published statements recognizing HSCT as a standard of care for patients with aggressive MS. Peer-reviewed studies, including a 2019 randomized clinical trial published in the Journal of the American Medical Association, have likewise concluded that HSCT is superior to conventional disease-modifying therapies for certain MS patients.

Despite this body of evidence, Anthem denied coverage multiple times. According to the lawsuit, Anthem first claimed the procedure could not be authorized because the hospital selected, Scripps Green Hospital, was out-of-network. A second denial asserted that the procedure did not meet the company’s internal criteria and was investigational.

The plaintiffs allege Anthem’s position was inconsistent with its own written guidelines. Anthem’s policy identifies HSCT as medically necessary for relapsing-remitting MS patients who meet specific conditions—including age, disease duration, and demonstrated resistance to other therapies. The McKays contend Callie satisfied those conditions, but Anthem nevertheless refused to authorize the treatment.

The complaint also states that Anthem denied Callie access to other therapies, such as natalizumab (Tysabri), which Anthem’s own guidelines recognize as a prerequisite for HSCT authorization. By doing so, the plaintiffs argue, Anthem created a “catch-22” situation in which Callie could not meet the criteria because the insurer had already blocked her from trying the very therapies it required.

After the initial denials, Callie filed internal appeals, commonly referred to as grievances. Anthem upheld its decision, citing facility restrictions and reiterating that HSCT was an investigational treatment. In later correspondence, Anthem suggested Callie direct her concerns to the California Department of Insurance but did not address her willingness to transfer treatment to a facility Anthem itself had designated as eligible.

The complaint alleges that Anthem’s grievance process was inadequate, reflecting long-standing systemic problems. The California Department of Managed Health Care has previously cited Anthem and imposed fines for deficiencies in grievance handling. In 2019, Anthem agreed to pay $2.8 million in penalties after state regulators alleged it failed to properly recognize, investigate, and resolve member grievances. A 2022 follow-up report found those deficiencies had not been fully corrected.

Ultimately, Callie proceeded with the HSCT procedure at Scripps Green Hospital in July 2025, paying out of pocket for the treatment. The lawsuit emphasizes that Anthem was aware Scripps Green would be approved as a “Center of Medical Excellence” facility just one day before her scheduled treatment, yet still refused coverage. The plaintiffs claim Anthem’s actions left Callie no choice but to finance the procedure herself to avoid further irreversible disability.

The McKays are suing for breach of contract and breach of the implied covenant of good faith and fair dealing. The lawsuit alleges Anthem failed to conduct a fair investigation, misrepresented policy terms, ignored medical standards, and denied benefits in bad faith. The plaintiffs are seeking compensatory damages for loss of benefits, as well as punitive damages, arguing Anthem acted with conscious disregard of their rights.

“This case highlights the serious consequences when insurers fail to honor their obligations under California law and their own policies,” said Robert Gianelli, partner at Gianelli & Morris. “When medically necessary treatments are delayed or denied, patients like Callie face worsening disability and are forced into impossible situations. Insurers must be held accountable when they put profits ahead of patients’ health.”

The case underscores a broader tension in U.S. health insurance between cost containment and access to innovative therapies. Insurers often classify new or high-cost treatments as investigational, while patients and their advocates argue that evolving medical evidence supports broader access to these treatments. For conditions such as MS, where traditional therapies may slow but not reverse disease, the stakes are particularly high.

Legal observers note that outcomes in cases like McKay v. Anthem could influence how insurers apply investigational exclusions in the future and may shape coverage determinations for other advanced therapies, including gene and cell-based treatments.

The case is McKay v. Anthem Blue Cross Life and Health Insurance Company, Los Angeles County Superior Court, Case No. 25STCV25633.

What Is HSCT and Why Do Insurers Resist Covering It?

Hematopoietic Stem Cell Transplantation (HSCT) is a medical procedure in which doctors collect a patient’s stem cells, use chemotherapy to suppress the immune system, and then reintroduce the stem cells to “reset” the immune system. In multiple sclerosis (MS) patients, the goal is to stop the immune system from attacking the nervous system and to halt progression of the disease.

Research has shown HSCT can not only stabilize MS but, in some cases, reverse disability. A 2019 Journal of the American Medical Association study found HSCT was more effective than standard disease-modifying therapies at slowing progression in relapsing-remitting MS patients. Professional medical societies in the United States and Europe have since recommended HSCT as an appropriate option for certain patients with aggressive MS.

Despite this evidence, insurance companies often label HSCT as “investigational” or “experimental.” Insurers argue that, while promising, the therapy is costly and has not yet been widely adopted as a first-line treatment. Coverage policies may require patients to exhaust other medications before HSCT is approved, or restrict treatment to designated transplant centers.

Critics contend these restrictions leave patients in a bind: they may be denied access to highly effective treatment until they have failed on less effective drugs, even as their disease worsens. Legal disputes often focus on whether insurers are applying outdated standards or misrepresenting medical necessity under the terms of their policies.