Does Insurance Cover Therapy?

Mental health is just as important as physical health but many insurance companies are not seeing it that way. This is evident in the past where many insurance companies used to provide better physical illness coverage as opposed to mental health disorders.   There has been an increasing need in our society for better mental health care as evident by increased psychiatric hospitalizations and lack of awareness surrounding mental health.

Are you Covered?


Medicare provides health insurance for Americans who are sixty-five years and above, have been working, and are paying for it through the system of payroll. It provides health insurance policies to younger people with some physical impairment or other major illnesses as determined by the Social Security Administration. Medicare is further divided into two parts:  Medicare Part A covers hospital, skilled nursing after someone has been admitted in hospital for three days and hospital services. Part B deals with outpatient services including medical and mental health services.  

In contrast to Medicare, Medicaid is a program that helps with medical costs for persons who are living below the poverty level. It is described as a government insurance program for persons of all ages whose income and resources are insufficient to pay for their health care.  The protection of The Affordable Care Act made a great achievement by expanding the eligibility for Medicaid. Research shows that Medicaid has improved the financial security of the citizens. 

Federal Marketplace Plans

There are also have federal marketplace plans that help people to shop for and enroll in affordable health insurance.   Small businesses can use the Small Business Health Options Program marketplace to provide health insurance for their employees. When using the marketplace, most employees have to pay a deductible before services can be used and almost always have a small copay.

Employer-Based Plans

Then lastly is the employer-based plan. It is the insurance that is taken by employers to cover their employees. The federal government subsidizes it in part through the exclusion of taxes for employers’ contributions to employee health insurance plans. Again, they usually have deductibles to meet and copays but they tend to have more providers in their network than Medicaid or Medicare.

Affordable Care Act and Mental Health Parity

Things have changed with the introduction of Federal Parity Law which was passed in the year 2008 which requires coverage of services for mental health, behavioral health, and substance use disorders to be comparable to physical health coverage.  The federal parity law requires insurance companies to treat mental and behavioral health and substance use disorder. This means that insurers should be treated financially equally without discrimination. The law of parity also covers some of the treatment limits. The law eliminates the maximum number of mental health visits although it does not hinder the insurance companies from implementing limits.  Some of the government insurance plans and programs are exempted from the parity law. Medicare, unlike Medicaid, is not subject to the federal parity.

Is Insurance the Best Way to Pay for Therapy?

There are advantages and disadvantages of using insurance coverage for therapy treatments. Most of the therapy treatment providers who accept insurance tend to book far out with some having long wait lists. Clearly, it means a delay in mental health treatment and thus the risk of making the problem worse. It is a disappointing turn for patients who decide to seek professional assistance with a significant amount of urgency to get in for an appointment. 

In cases where the insurance has approved the therapeutic benefits to the insurance holder, they can be made to cover up to a limited number of sessions and this means beyond that point, the patient will have to get back to their pockets and get some more cash to continue the treatment process.  Other insurances require a high co-pay or deductible amount that might be very costly as compared to other methods of meeting the expenses. 

Insurance Requires a Diagnosis

Since insurance companies cover and pay only for medical services deemed to be medically necessary, it is clear that in order for a policyholder to use their insurance coverage for therapy, they must be diagnosed with a mental health problem.  The mental health condition must be proven by a clinician to be affecting the individual’s health and general functioning on a daily basis. 

Most mental health problems are a result of normal difficulties in life and many reasons an individual might see mental health treatment are not necessarily a result of a diagnosable mental health disorder. Mental related issues like grieving a loss, life coaching, managing stressors or a loss of a job do not constitute a diagnosable mental health problem though they are mental health issues. 

Unfortunately, in these cases, it is much rarer for an insurance company to approve coverage for the much-needed treatment. Thus for an individual to benefit from a medical insurance, then the mental health problem should be diagnosable hence causing mental illness and must be causing significant functional impairment.    

Treatment Becomes a Part of Your Permanent Medical Record

Insurance companies require that the provider files medical documents with them. Any mental health treatment document that is filed through insurance goes to the individual’s medical record. A perceivable problem might arise on the next attempt to secure any health insurance or life insurance coverage. If the individual is able to obtain insurance with this later record, there is a higher possibility of having high insurance premiums, co-pays, and deductibles. Information is also collected on the kind of treatment the individual is receiving and on whether their situation is improving or not since their very motive is to stop paying as soon as possible. This trend results in a loss in confidentiality of the individual.

Limited Options for Providers

Individual seeking therapy are limited to the number of sessions covered by the insurance and thus prohibits some visits. The providers are left with limited options on determining the approach their patient deserves.  The insurance providers give little room for policy revision and this and it often results to increased premiums. The individual is forced to get in to their pockets to meet the extra charges.  Providers become a part of a network through the insurance company and often base what insurances they take by the pay from the provider and the ease of working with the insurance company.  Because of this, options for providers are limited.

What Else Can You Try?

The most effective option to address mental health and other therapy sessions is through private pay healthcare options. Private pay insurance schemes involve personal investment in an insurance product aimed at addressing specific issues as the patient’s needs. Private healthcare essentially means going outside the federal government insurance plans, and employer-based programs to ensure that you pay for services corresponding to your illness. Most of the insurance policies do not cover mental health issues comprehensively while many employer-based policies do not even consider mental health as part of a broad employee healthcare issue. There are many reasons which could inform mental health patients choosing private healthcare. It is essential to consider the privacy and discrimination associated with mental health, and therefore many people would never tell about the conditions. Mental healthcare patients choose a private pay system so that they can have a mental health assessment and subsequent diagnosis and treatment plans. Also, therapy is included as part of the service available with private healthcare since many federal subsidized healthcare programs and employer-paid schemes do not offer therapy services. Access to a therapist means treatment by a well-known specialist over a specified period as dictated by the contract agreement.    

Private Pay

You always have the option to pay out of pocket (private pay).  The benefit to private pay is that you do not need a diagnosis attached to receive therapy and you do not have to share your record with anyone, such as your insurance company or any medical or life insurances.  A person or entity would only know you are receiving therapy if you told them.  The downside to private pay is that therapy can be quite expensive.  You are paying someone for their time, their experience and their expertise.

Community Mental Health Centers

Community mental health centers are mandated by statues of different states to provide public mental health services in a community-based system. There are plenty of services offered at the centers aimed at tackling mental health complications comprehensively. Community mental health services offer a wide range of services and can often provide therapy as well as psychiatric services. 

The fee charged for the service is low as compared to subscribing to insurance programs which are not personalized. The quality of the services is determined by the human resource at each community mental health services. Instead of paying large sums to insurance firms and government subsidized programs without a commitment to mental health issues, patients should instead seek services at community mental healthcare centers. It is cheaper, and services are personalized and placed under one roof and within neighborhoods.                                                                                                       


We have come so far when it comes to mental health treatment, but we still have far to go.  It is important that we continue to advocate, vote and demand that therapy be made available to everyone, regardless of financial status.  Everyone needs to educate themselves on the resources available and speak to our government officials regarding the lack of care available. 

Therapy is an essential element of mental health because, after diagnosis, the therapy session is incorporated as part of the treatment procedure. The primary health insurance nationally is the Medicaid/Medicare, federal marketplace plans and employer-based plans. However, the plans do not cover mental health comprehensively, if any.  In essence, insurance is not always the best way to pay for therapy because insurance requires diagnosis and the services available may be limited for those seeking therapy. For many, seeking therapy is best achieved through private pay healthcare or attend community mental health centers which are purely established to provide comprehensive mental health services. We as a society need to continue to strive for mental health treatment that is available to all persons in need, regardless of economic status.

author avatar
Angel Rivera
I am a Bilingual (Spanish) Psychiatrist with a mixture of strong clinical skills including Emergency Psychiatry, Consultation Liaison, Forensic Psychiatry, Telepsychiatry and Geriatric Psychiatry training in treatment of the elderly. I have training in EMR records thus very comfortable in working with computers. I served the difficult to treat patients in challenging environments in outpatient and inpatient settings
Scroll to Top