Does Health Insurance Cover Psychotherapy?
Yes, depending on your plan, insurance can provide some coverage for psychotherapy. But it’s complicated. Below is information to help you make an informed decision about using health insurance to pay for psychotherapy.
Privacy
Most health insurance plans require ongoing paperwork and justification for therapy, often approving only ten sessions or less at a time. In order to justify your treatment, your therapist must provide the insurance company with a mental health diagnosis and sensitive personal information about your therapy which will go into health insurance files that can be accessed by numerous gate keepers, utilization reviewers and other employees.
Limitations of Coverage
The insurance pendulum appears to be swinging back towards greater coverage of mental health. Under managed care, plans severely limited mental health benefits but recent legislation is forcing insurers to provide increased coverage.
Currently the California Mental Health Parity Law of 1999 requires that insurers cover specific severe mental health diagnoses to the same extent they cover medical conditions. For adults, the following severe mental illnesses are covered under the parity law and receive more comprehensive benefits: schizophrenia, schizoaffective disorder, bipolar disorder, major depressive disorders, panic disorder, OCD, anorexia and bulimia.
In good news, the Mental Health Parity and Addiction Equity Act (MHPAEA) officially kicked in on July 1, 2010. As plans renew, mental health benefits must be equal to medical coverage provided by the plan. This new parity law covers most plans and requires equal coverage for all mental health and substance abuse diagnoses covered by the plan. However, the new law does not apply to individual plans or employers with less than 50 employees. The glitch is that insurers may still limit coverage based on “medical necessity” and plans are managing therapy visits very tightly, authorizing just a few sessions at a time.
Keep in mind that if you think you may want to be self-employed in the future, your mental health diagnosis and treatment records may count against you as a pre-existing condition, making purchasing private insurance more difficult and expensive.
Restricted Choice of Providers
The provider restrictions differ for PPO/POS plans and HMO plans and are described below. Keep in mind that more and more skilled, qualified therapists are choosing NOT to participate on managed care health insurance panels or are severely limiting their participation. The reimbursement rates are low, the paperwork is time-consuming, and the coverage is limited and tightly managed making involvement of the insurance company difficult for both client and therapist.
PPO or POS Plans
If you have a PPO or POS plan, you have the most flexibility and are fortunate. You can either choose a therapist from the “Preferred Provider” or in-network list of your health insurance company or you can choose an out-of-network therapist. The reimbursement rate will be higher if you choose from the insurance panel and will be lower if you choose an out-of-network provider.
PPO plans tend to reimburse based on what they call “usual & customary” fees. But the insurance plan determines what fee is “usual & customary” and generally these fees are not representative of actual psychotherapy fees.
For example, the insurance company may determine your benefit for therapy with a LMFT at a rate of $65 per session and pay some percentage of this fee. The problem is that in San Francisco, a fee of $65 is neither usual nor customary. An actual LMFT’s fee might be $150 per session. If your PPO plan pays 50% of each session, they’ll do this based on the “usual & customary” fee that they determine. So in this example, instead of paying 50% of the rate you are charged (e.g., $150), the insurance plan will reimburse $32.50 per session (50% of $65, their “usual & customary” fee) and you will be responsible for paying the remaining $117.50 per session.
HMO Plans
If you have an HMO plan, you are required to choose a provider who is on your insurance panel. Of note, most skilled, successful therapists don’t take insurance or limit their participation. Finding an effective therapist on your insurance panel will likely require some effort on your part, which is frustrating and disappointing. It’s worth the effort though because seeing an ineffective therapist can make problems worse and leave you feeling more hopeless and disheartened.
You might check to see how many sessions are covered by your plan and at what co-pay to make sure that using your insurance feels worth your while. You want to evaluate whether the actual financial benefit outweighs the downsides of compromising your privacy, choosing a limited coverage that may not meet your treatment needs, and perhaps most importantly, restricting your choice of providers.
Some people elect to forgo using their HMO insurance because they find the limitations outweigh the benefits. They choose to incur the out-of-pocket expense for therapy to ensure their privacy as well as to ensure that they are with a skilled therapist of their choosing for as long as their treatment requires. If you are concerned about whether or not you can afford therapy without insurance, see Low Cost Therapy.
Tips for Choosing a Therapist Covered by Your HMO
If you prefer to or simply must use your HMO insurance, you can request a list of providers through your human resources department or directly through your insurance. An online list of providers is often available. Once you obtain this list, I suggest that you ask friends, your physician or a therapist whom you respect to recommend providers on the list. Some of the providers on the list may also have websites where you can learn more about them and see who appeals to you.
When you meet with a therapist on your insurance panel or any therapist for that matter, ask questions and only go back if it feels like a good enough fit.
Click here or on the links to the left for additional resources about the different kinds of therapy, identifying potential therapists, and beginning and financing therapy.
