New York Attorney General Letitia James’s office says Carelon Behavioral Health wrongly denied addiction treatment coverage and failed to help New Yorkers find mental health providers who were actually taking new patients. As a result, the office says Carelon will pay at least $10.35 million, reimburse impacted patients, and expand access to mental health care across the state.
The announcement came Tuesday in a post from NY AG James
, the official X account of the Attorney General’s office, which wrote that “Carelon Behavioral Health wrongly denied addiction treatment coverage and failed to help New Yorkers find mental health providers who were taking new patients.” The post continued, “Now, we’re making Carelon pay $10 million, reimburse impacted patients, and expand access to mental health care.”
Under the settlement, Carelon will pay at least $10.35 million, including $2.35 million in penalties, fees, and costs, and up to $8 million in restitution to eligible members who paid out of pocket for out-of-network mental health care. Carelon must also repay eligible members who paid out of pocket for bills it denied, including eligible members with out-of-pocket payments or unpaid bills after improper addiction-treatment denials. The terms also include a $350,000 penalty for the substance-use investigation. The New York Attorney General’s Office says an independent monitor will review claims and determine eligibility.
A Massive Contract Already Under Scrutiny
Carelon is not a small player in New York’s behavioral health landscape. The company administers mental health and substance use disorder benefits for New York state employees and retirees under a contract valued at more than $2.7 billion, effective through the end of 2028, according to the same report. That scale helps explain why state regulators have kept a close eye on how the company handles coverage denials and provider access.
The scrutiny isn’t limited to the Attorney General’s office. Three plan members filed a lawsuit in New York in April 2025 alleging that Carelon knowingly published an inaccurate and misleading provider directory. In that case, the plaintiffs allege more than half of the providers listed in the directory either do not exist as described or otherwise presented problems for patients trying to get care. A federal judge in that matter dismissed breach-of-contract claims but allowed others, including deceptive business practices, false advertising, fraud, and unjust enrichment, to move forward.
A Pattern Across New York Insurers
Carelon is far from the only insurer New York has pursued over mental health access issues in recent years. A separate page from the state’s Attorney General describes a 2026 settlement with EmblemHealth that included out-of-pocket reimbursement and what the office called sweeping reforms to improve access to mental health and substance use disorder treatment. Another settlement, with MVP Health Plan, required the insurer to provide financial restitution to eligible members who paid more than they should have for mental health care due to inaccurate provider listings or a lack of available in-network providers dating back to January 1, 2020.
Further back, a 2021 joint announcement from the Attorney General’s office and the U.S. Department of Labor said United would pay approximately $14.3 million in restitution to affected consumers, including $9 million to more than 20,000 New Yorkers with behavioral health claims. Underlying much of this enforcement activity is a state standard spelled out by the New York State Department of Health, which notes that providers who are not accepting new enrollees should not be suppressed or removed from a managed-care provider directory — a rule aimed squarely at the kind of ghost-network problem regulators say has plagued patients trying to find real, available care.
An independent monitor will review claims and determine eligibility for mental-health restitution. The total number of members who will qualify and individual mental-health restitution amounts have not been determined. Carelon must proactively refund eligible members affected by improper addiction-treatment denials within 180 days.
