Carelon could pay over $10M in restitution, penalties under NY settlement order

A company that manages behavioral healthcare for around 4 million New Yorkers may pay up to $10.35 million in penalties and restitution over alleged improper healthcare denials and errors in online clinician directories, according to two settlements filed by Attorney General Letitia James on Tuesday.

Beyond the financial measures, court records show the settlements mandate several reforms to Carelon Behavioral Health Inc.'s business practices, such as ensuring all members can get urgent care appointments within 24 hours and initial outpatient appointments within 10 business days of a request for care.

Carelon manages the behavioral health portion of several insurance plans in New York, including EmblemHealth, Anthem Blue Cross Blue Shield, Independent Health and the Empire Plan for state and local government employees, according to the attorney general's office.

Carelon could pay up to $8 million in restitution to members forced to seek out-of-network care because they could not get an in-network appointment, according to court documents. Carelon must also pay eligible members who paid extra for healthcare because Carelon incorrectly listed a provider as in-network. Court records state that eligible members can seek reimbursement for care received as early as January 1, 2020.

"When someone is ready to seek help for a mental health condition or addiction, every day matters," James said. "Carelon left New Yorkers calling provider after provider who could not see them and made it harder for people to get the treatment to which they were entitled."

Carelon must also repay consumers who paid out of pocket or have unpaid bills for addiction treatment after a denial that did not use state criteria, dating back to January 1, 2020, according to court records.

The settlement includes a combined $2.35 million in penalties to the State of New York.

The settlements address two separate issues at Carelon — a directory of clinicians and the methods the company used to deny behavioral healthcare.

Carelon operates an online provider directory meant to help patients find doctors who accept their insurance. In 2023, OAG staff posing as EmblemHealth customers found that 82% of the 44 providers they called from Carelon's directory were "ghosts" who were not accepting new patients, couldn't be reached or were out of network with the customer's insurance plan.

These ghost networks are common in the insurance industry, with a 2026 Ohio State University study finding that over 60% of the calls placed by staff to doctors on a mental health directory went unanswered. Some consumers have turned to legal action over these practices. Attorney Steve Cohen of New York City law firm Pollock Cohen LLP said his firm has nine active class action lawsuits over ghost networks, including one lawsuit targeting Carelon.

"People pay a premium for an insurance plan, and they're not getting what they paid for," Cohen said in an interview with Newsday. "It's a simple breach of contract."

Beyond issues with its provider network, the AG believes that Carelon failed to adequately consider substance abuse histories, co-occurring mental health conditions and withdrawal symptoms when considering its coverage of inpatient detox treatment.

Court documents allege that Carelon's healthcare denials violated a 2015 settlement between the health company's predecessor Value Options and the state government over insurance denials.

"They change their behavior in the short run, and then way too often they go back to the bad behavior," Cohen said.

By Matt Hooke

matt.hooke@newsday.com