Health Insurers Pay Penalty for Mental Health Parity Compliance Failures
The Mental Health Parity and Addiction Equity Act (MHPAEA) requires health insurers and group health plans that offer mental health and substance use disorder (SUD) benefits to ensure that treatment limitations and financial requirements are no more restrictive than those for medical or surgical benefits. The insurance commissioner in Washington state has recently fined Regence BlueShield $550,000 for a lack of transparency around mental health parity, and Anthem Inc. has settled a lawsuit that alleged violations of MHPAEA and the Employee Retirement Income Security Act (ERISA) over the denial of claims for residential mental health and SUD treatment.
Regence BlueShield Failed to Provide Sufficient Information to Allow Analysis of Mental Health Parity Compliance
Washington State Insurance Commissioner Patty Kuderer has fined Regence Blue Shield $550,000 for alleged violations of MHPAEA. According to Kuderer, Regence BlueShield displayed a lack of transparency about compliance with MHPAEA, failing to provide documentation, as requested, to demonstrate that the benefits for mental health and SUD were on a level with medical and surgical (M/S) benefits.
Under MHPAEA, health insurance providers must provide documentation to explain any treatment limitations for plan members to allow them to be compared with the M/S benefits offered by the carrier’s health plans. If requested by the Office of the Insurance Commissioner (OIC), the documentation must be provided. “Over the course of two market scans, a market conduct review, and several requests between 2019 and 2023, Regence failed to provide details of its processes, including what it considers when setting provider rates and determining network adequacy, and how these considerations impact its decision-making,” explained Kuderer. “Throughout this process, Regence’s staff appeared to willfully misinterpret our questions, dismiss our concerns, and generally disregard their own responsibilities to their members’ well-being.”
Regence failed to provide adequate documentation regarding two treatment limitations – provider admissions standards and network adequacy – and could not provide detailed documentation demonstrating that the behavioral health and M/S benefits were comparable. The documentation provided to OIC showed large disparities in several areas, including out-of-network utilization, provider participation rates, in-network reimbursement rates, and M/S and behavioral service provider negotiation rates. The company failed to provide adequate explanations or analysis of the disparities. While Regence claimed that there was no disparity, documentation was not provided to support that position.
In the consent order, Regence agreed that the OIC allegations constituted admissible evidence but said the order did not determine any factual or legal issue. Regence said it added 5,488 new behavioral healthcare providers to its network in the state in 2024, added virtual behavioral healthcare provider options, and updated its provider directory system to make it easier for patients to find in-network behavioral healthcare providers. “We implemented state and federal requirements for behavioral health access in good faith, made necessary updates, and will continue prioritizing compliance while supporting future rulemaking for clear, consistent standards,” explained Regence in a statement.
Anthem Inc. Pays $12.88 Million to Settle Alleged MHPAEA Violations
Anthem Inc., now Elevance Health, has agreed to pay $12.88 million to settle a class action lawsuit that alleged that Anthem denied claims for mental health and SUD based on overly restrictive medical necessity guidelines, which were more restrictive than generally accepted standards of care. The lawsuit – Collins, et al. v. Anthem Inc., et al – was filed in the U.S District Court for the Eastern District of New York and asserted claims that Anthem violated ERISA and MHPAEA by creating and adopting medical necessity criteria for adjudicating claims for insurance benefits for residential treatment of mental illness and SUD that were more restrictive than those for M/S standards of care. Further, the company was alleged to have used the Challenged Guidelines to deny plan members coverage for residential treatment of mental health illnesses and SUD, which were more restrictive than the medically necessary criteria for comparable services to treat M/S conditions, in breach of its fiduciary duties.
Anthem Inc. denies any wrongdoing or liability and maintains that the appropriate guidelines were utilized properly; however, after considering the time, cost, and uncertainty of continuing with the litigation, it agreed to a settlement.
The class period spans from April 29, 2017, to April 30, 2025, and the class consists of any individual who had a health benefit plan covered by ERISA during that period who had a request for coverage of residential treatment services for a behavioral health disorder denied due to a lack of medical necessity, where the denial was based on Anthem’s Clinical UM Guidelines or the MCG Guidelines for Residential Behavioral Health Level of Care, and where the denial was not reversed on administrative appeal.
Anthem has agreed to pay $12.88 million into a settlement fund, from which attorneys’ fees and expenses will be deducted, along with settlement administrative costs and service awards for the class representatives. The remainder of the fund will be used to pay benefits to the class members. Class members may submit a claim for reimbursement of out-of-pocket losses due to having to pay for residential treatment services. Claims will be paid pro rata from the reimbursement settlement fund. Alternatively, if such a claim is not submitted, class members can claim a nominal payment of at least $100.
The deadline for objection to and exclusion from the settlement is December 19, 2025, and claims must be submitted by January 20, 2026. The final fairness hearing has been scheduled for January 26, 2026.
