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Details Regarding Insurance and Psychotherapy for the Consumer

Consequences and Risks of Using Health Insurance for Mental Health Treatment


In order for you, as an individual, to get health insurance benefits, the therapist or mental health professional is required to assign you a formal diagnosis from the DSM-V (Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition).  This diagnosis becomes part of your permanent record.  In addition, some insurance carriers request detailed records and notes, presumably to determine that treatment procedures are "correct," often decided by unqualified staff.  Once again, these materials are potentially available to others.  


Afterward, the insurers decide if they deem that diagnosis "medically necessary" and can deny benefits if it does not meet their criteria.  In addition, there is a short list of diagnoses the insurers consider "serious" and cover differently than others.  If you get diagnosed with a mental health disorder, you should be able to decide who gets access to that info and why. You lose control of that information when it is in your file being faxed/electronically transmitted to anyone in the health care industry who ever requires access to it. A diagnosis will be all that is seen and may negatively impact your eligibility for things such as life insurance.


Children have a more difficult time in many ways when they are given a diagnosis. This diagnosis can follow them through school, on to college, and be a future barrier to careers such as working with the Air Force or military, landing federal jobs, security clearances, aviation, and any other jobs requiring health-care related checks (many schools and healthcare institutions are now initiating these policies to screen out employees who they deem to be unstable or cost too much money in mental health care and lost work days).  If you child’s condition warrants a diagnosis, you may want to have some say over how that diagnosis functions in their life.


Anything that is part of your file becomes a permanent part of your file. This means that when you apply for new health insurance, life insurance, and many types of jobs, they can require an authorization to release information to view your entire medical record. With health care reform, being denied coverage due to a pre-existing condition is thankfully no longer an issue, however, companies can charge much higher premiums because of having ever been treated for a mental health issue.


A diagnosis is not the only thing that becomes part of your file. Insurance companies can require treatment plans, progress reports, and many other types of personal information to determine what, if anything, they will cover. These details about your treatment should be private, but instead they are open and available to anyone with access. This could include potential employers. The average insurance claim passes through 14 people while it is being processed.  In addition, health insurance companies can require providers to open up your entire mental health medical chart for audit (to determine if they want to retroactively deny the payments), sending their employees in to copy whole records. The California Psychological Association is challenging these audits currently through legislation in the State of California. 


The insurance company has several processes to approve treatment. They often only approve a certain number of sessions, or the frequency of them, even if more are necessary. They will often deny your claim and it could take months to get reimbursement, if at all. This can interrupt treatment. It can also take the form of a claw back, where although they have stated that you are covered and then deny the claim regardless, leaving the therapist to come back to you for compensation because you are ultimately responsible for treatment fees.


It should be between you and your therapist to determine what comes next in your treatment and how much of it you need. But, imagine an insurance agent sitting next to you in your session, clipboard in hand, making decisions about whether you truly “need” this therapy or not.


The rule of thumb when using insurance (directly or by reimbursement) is to contact them before treatment begins and get approved.  Ask what information you will need to present for reimbursement. If and when you are denied, be prepared to go through several levels of appeals process with your therapist to get your rightful coverage. This can take weeks to months.


They have preferred providers and you must choose one of them.  Even if you are happy with your provider, as I said, you don’t have a choice about what information is put into your file and shared with everyone. You don’t get to take that information out of your file once it is there. This can be devastating for some, and a minor irritation to others. You are the only person who can decide what is right for you.


You have a choice in who you see, whether you see them for a long or short amount of time, and whether you’d rather use your insurance. We just want you to have all of the info you need to make the right decisions for your health and your family.


If you are contacting your provider to see about coverage for out of network providers, ask the following:

  • How many sessions are covered?

  • Do I have to meet my deductible first? Is there an out of pocket max?

  • Do they require a treatment plan or detailed summary for reimbursement?


Another option includes using your Health Savings or Flexible Spending Accounts to pay for therapy using pre-tax dollars. I take all types of HSA and FSA cards with major credit logos on them. If you do not have one of these accounts, you could speak with your tax preparer to see if you could deduct therapy expenses from your taxes as an out-of-pocket health expense. This is an account that you can use for any uncovered health expense, including deductibles, and this money is not taxed.  You have choice when using this, but there is still a record.  

I like nothing better than to be able to tell my clients that they are the only ones that will ever decide who, if anyone, I reveal any information to about them.  If your wish is to have this, I recommend that as your course of action for getting psychotherapy treatment.  Myself and most other mental health practitioners will make every effort to negotiate a fee that does not present as a financial hardship to you so that this is accessible to you. 


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