What to Know About Insurance & Therapy

If therapy clients have insurance, should they use it? Why wouldn’t they?

First of all, insured clients have the right to not use their insurance to pay for therapy. Period. Self-determination is a big part of my practice, so as always, your decisions are your own. Though some of my personal perspective about things might show through here, my goal with this article is to be as honestly informative as I can. Admittedly, it’s very long, because it’s very delicate. You might consider taking it in chunks.

Second, you do not have to know where you stand on this going into our consultation call together. Your concerns are one of a wide range of things you might want to voice or ask questions about.

Third, this stuff is dry on paper. That’s why I’ve included imaginary scenarios throughout this article: to illustrate how this is more than just a financial question. These are not real clients, past or present, but I’ve aimed to make them pretty realistic nonetheless.

I’m starting with the “pros” because they’re more straightforward. They mostly speak for themselves. I think it’s also the case that most people who are asking this question are intending to use their insurance to pay, but are checking to see if there are reasons for hesitation. Those reasons will come later.

The benefits of using insurance

The possibility of lower costs. There are other reasons, but most of them are variations on that theme.

If you’ll bear with me, though, here’s a different one:

A male client comes in struggling with recently being laid off. He’s experiencing serious financial precariousness for the first time. If he had started a month ago, he would have chosen a higher fee level, made possible by a very well-paying job. But a few weeks later, he really can’t afford it.

In fact, the fee-level decision stabs the same raw spot that’s bringing him in for therapy in the first place. Practically, paying a higher fee won’t work; emotionally, paying a lower fee (or no fee) doesn’t feel manageable either. He’d rather not have to think about this right now. He has COBRA, so he decides to see if insurance will pay.

As much as I try to bring down the stress involved in choosing a private-pay fee level, for some clients the topic is just too loaded. There’s an appeal to the simplicity of their insurance company just paying what it’s going to pay, and them paying their part. That may have more to do with thoughts and feelings than it does with finances.

Circling back to lower costs, though, another reason to use insurance is to pay down your deductible. For folks who are unfamiliar: your insurance plan probably won’t help you pay for things until you’ve paid a certain amount (your “deductible”) on your own. After that, your health care in general gets cheaper.

So the logic here sounds like, “if I’m paying for sessions anyway, it might as well help make things cheaper sooner.” If none of the things in the rest of this article bother you too much, that’s a wise strategy.

The drawbacks of using insurance

Costs aren’t so predictable

While private pay costs won’t surprise you – there’s no cost change unless you agree to one, or seek one yourself – session costs through insurance may be less predictable than you expected. Each insurance company pays a therapist different amounts for different services; they set the dollar amount, and it can be hard to find out what that’s going to be until charges have already been made.

To the last point I made in the “benefits” section, there’s a counterpoint. During the pre-deductible phase when the company is making you pay 100% of the session cost, the session cost is decided by them, not you. That can be an issue if it’s higher than what you would have chosen to pay if insurance wasn’t involved.

We hope the math works out, where the savings you get after that through coverage more than make up for what you spent on the front end. Or maybe you already reached your deductible, so it’s not a concern. At least not for this year.

A straight married couple has been feeling more connected after a few months in therapy together. One of their challenges has been the fear the husband feels about their financial situation, which shows up in him questioning how closely his wife monitors finances. The wife has been paying for sessions through her insurance from work, and things feel steady.

The stress of the holidays gets to them, though, and a misunderstanding about Christmas gifts turns into an argument about money. After a tense week through New Year’s, they bounce back. But the wife has forgotten her insurance plan’s deductible, and when the couple is caught off-guard by the higher-than-normal bill, the husband’s fear flares up again.

Deductibles reset every year, meaning that you have to pay for things by yourself again for a while until insurance is going to help you. This usually means sudden increases in payments at the beginning of the year. If you planned for that, there may be no problem, but if you didn’t, it may be thoroughly unwelcome.

That scenario leads to another point. Whether it’s a deductible reset, or it’s your insurance company unexpectedly denying a claim (refusing to pay), they’ll hold you responsible for the full cost of the session. If that happens, the charge will most likely be made before the therapist (me) even knows about it. Because my contracts require me to use the insurance company’s exact rates and billing systems for these sessions, I cannot protect you from that surprise charge, nor am I allowed to retroactively apply my private sliding scale to soften the blow.

To make matters worse, claims can also be denied retroactively. That means that your insurance company could tell us that they’ve paid for a session, then later on change their mind and hold you responsible for the cost if they decide that they made a mistake by paying for it.

Insurance requires a diagnosis that becomes a part of your permanent medical record

Private pay doesn’t require me to give you a diagnosis. In fact, I don’t give one unless a client specifically requests one, which they might do when seeking accommodations at school or at work.

Insurance does. Diagnosis is probably the biggest concern people have about using insurance for therapy.

A Black law student has managed lifelong anxiety all the way up through undergrad, but the pace and pressures of law school have them literally losing sleep, and the racism they’re encountering is layering anxiety on anxiety. They feel complicated mixed feelings about going to therapy for the first time, but the sleeplessness and worry are just too much, so they give it a try.

They think they probably ought to pay with their insurance. They do some research and realize that a diagnosis on record could affect licensure in some states, which in turn could affect internship choices that might lead to practicing law in those places. They feel that the decisions ahead are complex enough as it is; they decide to work with an out-of-network therapist and pay out-of-pocket to keep this part simple.

Having a diagnosis on your medical record can affect things in some special circumstances. As in the imagined scenario above, a diagnosis can affect some professional licensing contexts (ex. pilots, commercial drivers, law enforcement and first responders, etc.) and security clearances (ex. FBI, military, intelligence, some federal contractors).

The details of this are well outside the scope of my knowledge, to be honest. What I do know is that it would be wise for you to consider your occupation – or future occupation(s) – and ask knowledgeable, reliable sources in the field who can speak to the consequences of having a diagnosis on record.

Similarly outside the scope of my knowledge, but something I’m aware of, is that a diagnosis might affect applications for life insurance. Mild, well-managed diagnoses may have little to no effect. But some diagnoses – particularly the more severe ones – are prone to raising life insurance premiums and lowering benefits. If that’s a concern for you, I must recommend that you speak about it with a lawyer or qualified insurance professional.

I can, however, speak confidently about a final point on diagnosis, and it also answers the question “why is diagnosis required?”

Insurance companies want to be confident that your therapy is “medically necessary” (by their definitions) before they’re willing to pay for it. Sometimes 'X diagnosis' is the most accurate description of what you are experiencing, but the insurance company does not consider it severe enough to pay for treatment. If your symptoms do not happen to meet the strict criteria for a more severe 'Y diagnosis', your claims could be denied. This puts clients in a highly stressful position where their coverage is dictated by the insurance company's definitions of severity.

You might already see how that stress keeps on extending into the life insurance concern, where a more severe diagnosis is likely to be viewed unfavorably. Or with professional licensing where, for example, one diagnosis may not be a concern for pilots while a more severe one is a deal-breaker.

This is also particularly applicable to couples’ work, where insurance coverage depends upon one member of the couple having a sufficiently severe diagnosis. This certainly can happen, but in practice, this is not common. Most of the time, what couples are wanting to see change (ex. communication problems) isn’t something that exists inside one partner but not the other. There might not be an appropriate diagnosis to give; if not, insurance companies call this work “medically unnecessary”.

More on that in the section below, entitled “Insurance makes demands that can actually influence the therapy itself”.

A final thing worth noting here is that there are specific diagnoses – for example, ADHD and autism – that require special training and credentials for therapists to be able to give. Oftentimes, if someone needs that diagnosis on record, their therapist will be sending them to someone else for an evaluation before the therapist can use that diagnosis for their insurance.

Insurance reduces privacy

When clients don’t involve insurance in their therapy, their records stay between themselves and their therapist for the most part. There are some uncommon but important exceptions to that statement – most of which have to do with extremely serious safety concerns and court subpoenas – but those exceptions also apply when a client pays through insurance.

When you pay through insurance, your insurer has access to your therapist’s notes and your treatment information. Even just having a diagnosis is already your insurance company knowing things about you, about your thoughts and feelings and behavior. Lots of people have been very uncomfortable about this.

And now, with changes in technology and government policies, there continue to be growing concerns about privacy, and about what happens if an entity outside your insurance company and therapist’s practice accesses your information.

Insurance or not, a therapist’s practice is not perfectly secure either, but involving an insurance company is certainly a major increase in the flow of information. Generally speaking, where there’s more flow, there’s more risk of leaks.

One caveat worth noting: when a therapist is out-of-network – where a client pays with a “superbill” – the insurance company has less access to notes than to in-network therapists’. There is generally much less involvement. More on superbills in a later section.

With all these privacy concerns about the wider world, sometimes folks don’t consider the ones that are much closer to home.

A young lesbian couple has started to talk about getting married. Things feel great in the relationship, and they both really want marriage. But the idea feels scary for the younger partner in a way she can’t shake, then that scares her girlfriend. Her parents’ lukewarm acceptance of her sexuality doesn’t help.

She’s 25, still on her parents’ insurance, and she finds a couples’ therapist in-network. Before she starts, she looks online and finds out that the insurance company, by default, is going to send an “Explanation of Benefits” (EOB) to the policyholder – her father. She learns that there might be an option for her to get it sent to her address or email instead, but when she searches the portal, she finds out that her insurance provider doesn’t give her that option.

She reads that her parents would probably see that it’s for couples counseling when they receive the EOB. Afraid her parents might jump to conclusions and be reluctant to support the marriage, she talks it over with her girlfriend, and they decide to discuss this concern during the private consultation call with the therapist.

During consultation, they learn that because their focus is on general relationship strengthening – that there’s nothing “disordered” or pathological about these fears of marriage – their treatment will not be considered “medically necessary” by the insurance company. This actually comes as a relief, because it means they’re allowed to use private pay and keep the EOBs away from her parents.

When you first file a claim to have your insurance company help you pay for therapy, whoever owns the insurance policy is supposed to receive a document called an “Explanation of Benefits” (EOB). An EOB outlines in detail the ways the insurer will and won’t pay for treatments. It typically includes what kind of treatment the claim was for – how long sessions are, whether it’s individual or couples/family counseling, etc. – and sometimes even includes the diagnosis the therapist gave.

If the policyholder is you, then you’re the one who receives it. If instead the policyholder is your parent or guardian, or your spouse, the insurance company will send it to them. As the patient, some insurance companies will let you request to have it sent to you instead. But not all insurance companies. And even if they do, it’s an administrative task you’d have to complete to maintain your privacy in this way.

Before the next section, I’ll provide some important legal information. If your eyes glaze over in the process of reading it, the bottom line is that we can discuss your options in our consultation call if protecting your privacy from your insurance company is a concern.

Your federal privacy rights when paying out-of-pocket

There is a specific federal privacy right under HIPAA (the law that protects your health information) that you might want to know about when weighing these privacy concerns. Under federal law, if you pay for a healthcare service in full, out-of-pocket (without help from insurance), you have the right to submit a written request asking your provider not to disclose any information about that service to your insurance company.

If you make this request and pay in full, federal law forces the provider to honor it. If exercising this specific privacy protection is important to you, please bring it up during our private consultation call so we can discuss your options. It is, however, important to know how this right intersects with the practical reality of my practice:

Out-of-network with your insurance, OR if your symptoms do not meet your insurance company’s criteria for a "medically necessary" diagnosis:

My contracts allow you to pay out-of-pocket for your sessions under one of two conditions: (1) if I am not paneled with your insurance company – that is, if it’s not one of the companies I named in my FAQ – and/or (2) if we determine during an evaluation that your insurance company will not consider your treatment “medically necessary”.

In these scenarios, you have the absolute right to restrict me from sharing your records with your insurer, and I will gladly honor that written request. That includes not sharing that you are receiving treatment from me at all.

In-network with your insurance AND your treatment is "medically necessary":

There is a direct conflict between your federal privacy rights and my network obligations. My contracts with these insurance companies dictate that if you are an active enrollee and your treatment meets the criteria for medical necessity (a diagnosis), I am strictly required to bill your insurance.

The contracts explicitly prohibit me from allowing you to bypass your active benefits to pay a private-pay rate.

Because your federal HIPAA right requires a full out-of-pocket payment, and my network contracts forbid me from accepting one for covered services, your rights and my contracts are at odds.

Again, if exercising this specific privacy protection is important to you – that is, not disclosing things to your insurance company – please bring it up during our private consultation call so we can discuss what this conflict means for your options.

Now, back to the bigger picture.

With an out-of-network therapist, it’s extra paperwork for the client

A client with ADHD who has been paying out-of-pocket lands a stressful new job with benefits, including insurance through Blue Cross Blue Shield. He considers using it to pay for therapy, partly to help meet his deductible faster. There’s a surgery he’s needed for a long time, and he can finally afford it if insurance will help cover it.

He brings it up with me, and I let him know that I’m not in-network with BCBS. To use insurance, I would send him a superbill, and he would have to remember to turn it in to BCBS. It wouldn’t be done automatically, it would be slower, and they might not reimburse him, depending upon what his plan covers. With all the stress at work, he doesn’t feel like he has the brain space for that.

A superbill is a special kind of invoice that shows your diagnosis and the treatment you received. They are made after sessions, after charges have been run, and they can be sent electronically. You pay for a session by yourself, then go online to your insurance portal and upload it (or physically mail it to your insurer in some cases); after they process it, if it meets their criteria, they send you money to reimburse all or part of it.

If your therapist isn’t “in-network” (able to engage directly with your insurance company for payment), your only option for getting help from your insurance company is sending them superbills. If you intend to try, it’s best to call your insurance company or read through your insurance documents before you do, to make sure they’ll cover the treatment and you’re not wasting your time.

There’s one more consideration in the “cons” section, and to me, it’s the most important:

Insurance makes demands that can actually influence the therapy itself

When I talked about diagnosis and having to prove to your insurance company that the sessions are “medically necessary”, I didn’t explain the rest of what goes into that. To be very honest with you, this is where my perspective will probably show through the most in this article, since it’s more of an inside-look into being a therapist. I share it because this is where insurance can get involved in our relationship, and our relationship is the key to the way I practice. In my clinical opinion, this is one of the most counterproductive aspects of insurance if insurance is supposed to be helping clients in their efforts to feel better.

Every therapy note – which your insurer can analyze – must provide the “proof” of medical necessity. 

For insurance to help pay for a session, the therapist’s note from that session needs to have a description of symptoms that matches the diagnosis they gave you. It needs to state actions the therapist took that have been shown to help those kinds of symptoms. And it needs to describe the effect the actions had on those symptoms (i.e. how they did or didn’t change by the end of the session).

You can probably see how this might create a tortoise-and-the-hare problem: it can encourage a therapist to push for immediate (within-the-hour) symptom improvement, even if a less immediately beneficial approach might be the one that supports deeper, more lasting relief. That phenomenon is worthy of its own article.

There is a more inescapable problem, even for therapists who can resist the hare impulse: in reality, even if a diagnosis does an excellent job of describing a client’s symptoms – for example, imagine that it’s PTSD – every single note is talking about PTSD symptoms and treatment.

We could spend the whole session talking through a disagreement you had with your roommate, or challenges caring for a sick loved one, or how you started looking for a different job, or how angry but relieved you felt after you finished your taxes. Improvement around any of those things is likely to improve PTSD symptoms in a roundabout way; this is true. And PTSD symptoms probably didn’t make any of those situations better; also true.

But it might feel like a stretch for us to say that PTSD symptoms had a big hand in every one of them. It would probably be unhelpful if I said that to you. Still, the note is going to be all about naming those roundabout connections to PTSD.

Like other therapists who accept insurance, I’ve learned how to solve the puzzle for an insurance company, to show them those connections. At the same time, I know that not every session is “about PTSD”. We might not even talk about it directly very often, and personally speaking, I certainly wouldn’t think about you in terms of PTSD. In my eyes, you’re not PTSD; you are you.

I am very mindful of the distinction between the note-puzzle and your living, breathing, unfurling experience. But no matter how mindful I am, the process of again and again connecting everything to PTSD is – on some level – going to make the concept of PTSD a bigger presence. At least bigger than it probably would have been if I didn’t have to write my notes in this way.

This shows up in couples’ work too, as I mentioned in the section above about diagnosis. In cases where the “problem” in the relationship is a set of symptoms that one partner has, insurance companies may cover those sessions. But repeatedly connecting everything to a problem I’ve located in one partner but not the other? That can be an extraordinarily harmful framing that utterly fails to see how these situations actually improve: from very mutual efforts that are not based in blame.

I am exceedingly careful not to operate through this framing, but like my point above in the PTSD example, subtle effects can make a difference.

I’ll close out the drawbacks with one last vignette.

A client paying through insurance discovers that her difficulties concentrating have a lot to do with avoiding reminders of some things from the past that are still upsetting to think about. She’s a very private person. We realize that her focus might improve if we get her some relief through Eye Movement Desensitization and Reprocessing (EMDR). She’s a little nervous, but hopeful.

I let her know that – in order to track progress, and not lose our place or mix things up in the process – for this kind of therapy, I have to take more detailed notes than I usually do. She really wants that relief, but she worries about her privacy through insurance. She voices her concerns and wishes to me, and we discuss her options.

This one mostly speaks for itself, I think: if we decide to work together in a way that needs more specific notes, that means a further loss of privacy, knowing that your insurer is able to access those notes. And those notes might be especially sensitive. If this is a concern for you, I would like to discuss it and help you find the path that’s going to serve you the best.

Okay, so now what?

Just because the “drawbacks” section above is so much longer than the “benefits” section doesn’t mean using insurance is the wrong choice for a client. I’m available to hear out your concerns and offer clarity about options.

That said, you might be coming into therapy feeling an unmanageable amount of confusion and overwhelm. If you’ve found yourself blazing through this article, stress-reading, I gently invite you to consider that maybe the relative simplicity of private-pay – even if it needs to be lower-fee – might be a helpful place for you to start.

If you and I haven’t spoken yet, I’ll be happy to explore these concerns on our consultation call. And if you’re considering other therapists, I’d encourage you to do the same with them.