State insurance regulators have fined 15 health insurers -- including two in Western New York -- a total of $2.7 million for failing to comply with the state's Timothy's Law requirement that they tell small businesses about mental health coverage options.
The fines mark the first-ever such penalties against insurers for violating the five-year-old mental health parity law, which became effective in 2007. The law is named for Timothy O'Clair, a 12-year-old boy from Schenectady County who committed suicide in 2001 when his family couldn't obtain adequate mental health treatment for him.
The insurers, including Buffalo-based HealthNow New York and Williamsville-based Independent Health Association, were cited by the Department of Financial Services because they didn't inform clients that they could buy special insurance coverage for mental illnesses and children with serious emotional disturbances.
That's a requirement of Timothy's Law, which mandates that insurers allow small employers to buy extended mental health benefits when they buy or renew their basic health insurance plans.
The coverage was available to them, but the insurers didn't tell them that in all cases.
"Mental illness can have devastating consequences for families," said Benjamin M. Lawsky, superintendent of the Department of Financial Services. "It's essential that people understand that insurance benefits are available for treating mental illnesses and that businesses know this option is available."
Independent Health was ordered to pay $112,350, while HealthNow paid $101,640. Those were the lowest of the fines allocated against the 15 subsidiaries of seven insurance companies. UnitedHealth Group and its Oxford Health Plans subsidiary downstate paid the most, at $1.3 million, followed by Empire BlueCross BlueShield, at $480,440, and HealthNet, at $260,680. MVP Health Care of Schenectady paid $215,630, while HIP Health Plan of New York paid $187,570.
"The requirement and process of written notification to our small groups as required by the amendment to Timothy's Law was not followed for a short period of time," HealthNow spokeswoman Julie Snyder said. "Written notification of the option to purchase expanded coverage for small groups is in place, and we remain compliant with all aspects of Timothy's Law."
All said the violations were not due to any "conscious intentions to evade the requirements of the law," and all agreed to take steps to prevent the mistake from recurring, the state said.
"We worked closely with the state on implementing Timothy's Law; however, we inadvertently overlooked the annual requirement to provide written notice to small groups that a rider was available to purchase the large-group level of coverage," said Independent Health spokesman Frank Sava. "We have since changed our processes to notify small groups on an annual basis as required."
Timothy's Law requires insurance plans to provide 30 days of inpatient treatment and 20 days of outpatient visits for mental health treatment.
Large-group plans, for employers with more than 50 workers, must cover treatment of biologically based mental illnesses and children with serious emotional disturbances at a level that is comparable to coverage for nonmental health conditions. Small groups must be given the option of buying that level of coverage as an extended benefit.
The violations, which occurred in 2009 and 2010, were discovered after state regulators investigated complaints from small businesses, which said they would have bought the coverage but were never advised of that option. Regulators looked at other insurers as well but didn't find violations.
"We are very pleased that the Department of Financial Services has taken our concerns seriously," said Shelly Nortz, deputy executive director of the Coalition for the Homeless and a steering committee member of the Timothy's Law Campaign. "Superintendent Lawsky and his team are to be commended for upholding the right of small groups to purchase the complete Timothy's Law mental health benefit as required by the statute."