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Lawsky Enforces Mental Health Coverage Law with $2.7M in Fines

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New York’s Department of Financial Services (DFS) has fined insurers  $2.7 million because the insurers failed to notify small businesses that they were eligible to buy special insurance coverage for mental illnesses and children with serious emotional disturbances, the DFS announced today.

Oxford was fined $1.3 million, Empire almost $500,000, and HealthNet and MVP more than $200,000 each. All told, 15 insurers were fined for violating notification requirements under Timothy’s Law. 

These are the first-ever fines levied under Timothy’s Law, which became effective in 2007.

The law states that insurers must give small employers the option of purchasing the extended mental health benefits when they buy or renew their basic health insurance plans.

The DFS was alerted to the violations after it got complaints from a number of small businesses. The businesses said they would have purchased the coverage for their employees, but were never advised of that option when they purchased or renewed their basic health insurance plans.

The insurers being fined said the violations were not the result of conscious intentions to evade the requirements of the law. They all agreed to take steps to prevent the recurrence of violations in the future.

“Mental illness can have devastating consequences for families. It’s essential that people understand that insurance benefits are available for treating mental illnesses and that businesses know this option is available,” DFS Superintendent Benjamin Lawsky said.

“We are very pleased that the Department of Financial Services has taken our concerns seriously,” stated  Shelly Nortz, deputy executive director with Coalition for the Homeless and Steering Committee and a member of the Timothy’s Law Campaign.

Under Timothy’s Law, insurance plans – for both large and small employer groups – are required to provide 30 days of inpatient treatment and 20 days of outpatient visits for mental health treatment.

Large group plans with more than 50 employees are mandated to provide coverage for treating biologically based mental illnesses and children with serious emotional disturbances at a level that is comparable to coverage for non-mental health conditions.

The law requires insurers to offer small groups the option of buying this level of comparable coverage as an extended benefit. Small groups are those with fewer than 50 employees. The DFS investigation found that the violations occurred during calendar years 2009 and 2010. In addition to the insurers fined, Department examiners also polled additional insurance companies, but those companies were not found to have failed to provide the required written notifications.

Timothy’s Law is named for Timothy O’Clair, a 12-year-old boy from Schenectady County who took his own life in 2001 when his family was unable to obtain adequate mental health treatment for him. O’Clair had struiggled with severe emotional and behavioral problems throughout his short life.


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