Anthem to Pay Nearly $12.9 Million in Settlement Over Behavioral Health Coverage Denials

Behavioral health providers and patients scored an important win in federal court this month. A New York magistrate judge has given preliminary approval to a $12.875 million settlement resolving claims that Anthem Inc. wrongfully denied coverage for residential behavioral health treatment under employer-sponsored health plans.

The Case at a Glance

The class action, Collins et al. v. Anthem Inc. et al., alleged that Anthem improperly rejected claims for mental health and substance use disorder residential treatment, citing “lack of medical necessity” under its utilization review guidelines. The lawsuit challenged Anthem’s practices under ERISA (the Employee Retirement Income Security Act), which requires health plans to provide benefits according to fair and consistent standards.

On Friday, U.S. Magistrate Judge Steven I. Locke of the Eastern District of New York granted preliminary approval of the deal. A final approval hearing is scheduled for early next year.

Who Benefits From the Settlement

If the settlement is finalized:

• Class members will receive either a $100 minimum payment or a pro rata reimbursement from the settlement fund.

• The fund will be distributed after deduction of attorney fees, expenses, and administration costs.

• The settlement covers ERISA plan members whose residential treatment claims were denied as not medically necessary under Anthem’s guidelines.

The class is represented by attorneys from Zuckerman Spaeder LLP, Berger Montague, and Psych Appeal Inc. Anthem is represented by Crowell & Moring LLP.

Why This Matters for Providers

This case underscores a longstanding tension between payers and behavioral health providers:

1. Medical Necessity StandardsUtilization review guidelines are often applied in ways that restrict access to higher-level care like residential treatment. When insurers deny claims based on narrow definitions of “medical necessity,” patients are left without coverage, and providers are left uncompensated.

2. ERISA as a ToolThe case demonstrates how ERISA litigation can hold insurers accountable when they fail to provide benefits as promised. Providers and patients can leverage ERISA to challenge denials and push back against restrictive payer practices.

3. Financial ImpactFor many behavioral health facilities, insurance denials for residential care represent a significant revenue risk. Settlements like this not only compensate affected patients but also send a signal to insurers that courts are scrutinizing their practices.

4. Future Litigation & ComplianceAnthem is not the only payer facing scrutiny for behavioral health denials. Similar class actions and regulatory investigations are underway across the country. Providers should anticipate evolving standards and ensure their documentation clearly demonstrates medical necessity in line with both clinical and legal definitions.

Lynne Legal’s Perspective

At Lynne Legal, we view this settlement as a reminder that coverage denials are not the end of the story. Providers and patients have powerful legal tools at their disposal when insurers act unfairly.

We assist behavioral health practices in:

• Appealing payer denials effectively and strategically.

• Strengthening documentation to align with utilization review standards and minimize risk of denial.

• Advising on ERISA litigation strategies when coverage disputes escalate.

• Navigating class action implications, helping providers understand what cases like this mean for their reimbursement practices.

The Anthem settlement may not solve all the challenges providers face with insurance reimbursement, but it is a clear sign that the courts are willing to hold payers accountable. For providers, that means now is the time to tighten documentation, know your rights under ERISA, and partner with legal counsel who can help protect both your practice and your patients.