What to know about insurers mental health coverage requirements


The U.S. faces an ongoing mental health crisis in the aftermath of the illness, death, social disruption and economic hardships of the COVID-19 pandemic. Yet chronic gaps persist in access to mental healthcare despite the enactment of major laws meant to guarantee that health insurance covers these services.

More than 20% of U.S. adults reported having mental illnesses this year, according a survey by the advocacy organization Mental Health America. Among those, 55% said they were unable to obtain treatment.

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A shortage of mental and behavioral health practitioners is a significant part of the problem, as is a stigma against seeking care. But despite coverage parity laws, health insurance coverage of mental healthcare doesn’t measure up to other forms of care, particularly when it comes to the size and variety of clinicians participating in provider networks.

Here’s what you need to know about what health insurance coverage of mental healthcare:

What mental health services must private insurers cover?

President Bill Clinton enacted the Mental Health Parity Act in 1996, which requires large-group insurers to treat mental health the same as physical health in terms of coverage and benefits. Prior to its passage, insurers often set separate, higher deductibles for mental health treatment, limited the number of behavioral health visits a patient could have each year and refused to cover out-of-network care. Congress updated the law in 2008 to extend parity requirements to substance-use disorder treatment.

In 2010, President Barack Obama signed the Affordable Care Act, establishing mental health and substance-use disorder services as essential health benefits for individual and small-group plans. Several states enacted more stringent laws. Federal law requires Medicare, Medicaid, and the Children’s Health Insurance Program to comply with parity requirements.

The Consolidated Appropriations Act of 2021 added a level of oversight to parity rules by requiring insurers to analyze how their mental health benefits and networks compare to their medical and surgical benefits, and to provide analyses to regulators if requested. The Labor Department is reviewing its first batch of reports from 156 carriers, the regulator reported to Congress last year.

The Labor Department told Congress that insurers need additional guidance on how to comply with parity rules, and the agency is considering issuing a new regulation this year.

Can insurers require prior authorizations for mental health treatments?

Insurers may impose prior authorization and step therapy requirements or review claims for medical necessity, so long as they apply the same policies to all forms of care. For instance, an insurer that establishes medical necessity standards for experimental medical treatments must use the same standards for behavioral health, said Sarah Millar, a partner at the law firm Faegre Drinker Biddle and Reath. Insurance companies also must justify any deviations from this practice to regulators.

“The challenge comes in that insurers have developed medical management policies very specific to particular treatments,” Millar said. “It’s a complex process to provide parity.”

Health insurance companies have faced lawsuits from patients claiming that such limitations on mental health services violate parity laws. For example, thousands of people sued a UnitedHealth Group subsidiary, alleging the insurer’s mental and substance-use disorder treatment coverage guidelines don’t conform to clinical standards. A federal judge initially ruled for the plaintiffs, which sent shockwaves through the insurance industry by setting a new legal standard. The decision has since been overturned; the patients have appealed.

Do insurers pay mental health providers as well as medical clinicians?

During his State of the Union address in February, President Joe Biden proposed policies to address low reimbursements to mental health providers. These professionals are paid 19% less on average than primary care physicians and 16% less than medical specialists, according to data the consulting firm Milliman published in 2019.

Insurers often pay higher rates to out-of-network mental health practitioners than to in-network providers, which violates parity laws, said Stephen Gillaspy, a clinical psychologist and senior director for health and healthcare financing at the American Psychological Association.

“There’s not adequate enforcement,” Gillaspy said. “Like many things, you can have a law on the books, but if you don’t actively enforce it, there’s not much incentive to join [insurer] panels.”

The Labor Department requires insurers to submit reimbursement data for behavioral health providers, Millar said. “The DOL is asking questions like, ‘How do you determine the provider rates for mental healthcare providers versus [medical and surgical clinicians]?’ ‘What’s the data you’re relying on?’” Millar said.

Commercial insurers generally follow Medicare’s lead when setting payment and coverage policies. If Medicare reimbursed mental health and substance-use disorder providers at higher rates, private carriers would likely follow suit, Millar said.

Why are there so few mental health providers in insurance networks?

For starters, there is an overall dearth of mental health professionals. As of March, 27% of U.S. residents lived in mental health shortage areas, the Health Resources and Services Administration reported. More than 8,200 additional practitioners are needed to meet existing demand, according to HRSA.

In addition, many mental health providers work in smaller groups or in solo practices, which makes it hard for them to manage contracts with insurance companies, Gillaspy said. “There’s an administrative burden to that. That’s time that you have to spend doing that versus seeing patients, and there’s not a huge bang for your buck.”

Because most mental health providers are not physicians, and because there are many specialized types of professionals with varying levels of education, training and credentialing, health insurance companies struggle to properly categorize these providers and to ensure that policyholders have access to a full array of practitioners, Gillaspy said.

“On the medical side, there’s a more clear delineation of specialization areas. So just because you’ve got X number of mental health providers, you may not have enough for certain specialties,” Gillaspy said. “Sometimes in behavioral health, they just get lumped together.”

There is also the issue of network accuracy in general, which the federal government is investigating.

The Centers for Medicare and Medicaid Services is gathering input on the possibility of creating a national registry of in-network healthcare providers. And the Labor Department requires insurers to report the number of mental health providers in their networks and to explain the process required for clinicians to participate.

How did the end of the public health emergency impact digital mental health startups?

Digital mental health providers sprang up during the pandemic in response to rising consumer demand for remote care. Research and digital health venture firm Rock Health estimates that such companies attracted nearly $60 billion from investors since 2020.

Biden signed sweeping legislation last year that extended Medicare waivers for telehealth reimbursement through next year, including those allowing providers to treat patients located in states other than where they are licensed. That has given companies offering remote mental healthcare time to adapt their businesses for when these regulatory flexibilities end.


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