How to use insurance benefits to pay for psychotherapy
One therapist’s process for helping people understand the confusing world of insurance and mental health.
Disclaimer and tl;dr
The world of insurance benefits is complex and nuanced. This article is not intended to (nor could it) cover all of the different insurance plans in the marketplace today. There are definitely omissions and possible inaccuracies due to differences from plan to plan. The best place for you to find out about your insurance benefits is by calling your benefit plan customer service line or going to the plan website. This information is usually located on the back of your insurance card. Any information provided here is purely informational based on personal experience and should not be used as the sole resource of information when making mental health or medical decisions. Please consult with our insurance provider directly to receive the best explanation of your individual benefit plan.
Where do I begin?
Let’s face it. Insurance benefits are confusing! And boring, and frustrating, and not something anyone wants to spend their free time figuring out. Unfortunately, if you don’t understand your benefits, you may not be getting the help you need, or may feel even more frustrated and hopeless when you actually need to get into see someone. Knowing your plan, and how to use it to supplement your mental health and wellbeing, can help to decrease anxiety and depression symptoms, and empower you to take control of your mental health and wellbeing.
Turns out, one of the biggest obstacles to therapy is the belief that even though you are in a lot of emotional pain (as evidenced by anxiety, stress, trauma, burnout, depression, relationship problems, substance use problems, anger, risky behaviors, or even suicidal thoughts), the thought of having to pay for therapy can stop you cold in your tracks. That’s pretty normal, actually. It’s hard to put hard earned money toward a problem when you feel like it’s not your fault, or it is a result of outside circumstances. This is where insurance benefits can help ease the pain of paying for a service that can help you heal, but may have a price tag that is hard to swallow.
Insurance benefits can help open up a path toward healing, and soften some of the discomfort that comes from paying for an often unpleasant or difficult experience. (Though -to clarify- therapy is not inherently unpleasant or difficult! Sometimes the self-discovery, recollection of past traumatic experiences, or practices in thought and behavior change can be challenging.)
So…it begins with information; understanding what your benefits are and how you can use them to meet your needs.
Insurance abbreviations: What is OON and INN and HMO and PPO
Before we get too deep into the details, it may be helpful to define a few common abbreviations in the insurance world. These terms are used so much that it may feel a bit embarrassing if you don’t know what they are or what they actually mean. So let’s fix that by getting a brief introduction here.
I’ve listed only some basics here, and there are likely a lot more or different variations out there. So if you come up on any more, do a little research and find out what they actually mean. It may mean the difference between getting coverage, paying out of pocket, or having your insurance provider tell you that they have determined that your service was not covered and you (or your therapist) having to pay back the money spent for past therapy sessions. That can definitely impact the therapeutic relationship and your course of therapy. So a little upfront knowledge can save you and your therapist from that headache.
OON - Out of Network
Therapists (and other medical providers) often state that they are “OON”, “INN”, or “Private Pay” on their websites. Each of these terms indicate their relationships with insurance providers. It can be helpful to understand these terms as it will impact how you pay for services and if you can receive insurance coverage or reimbursement for your therapy appointments.
OON means Out of Network. This means that your therapist does not have a contract with your insurance provider but can provide you with a medical receipt for services. To qualify for this you must have a valid medical diagnosis for a mental health condition. Your insurance provider then has access/rights to your therapy progress notes as they are paying for your treatment.
Typically you will pay the full fee for your appointment directly to your therapist before or after the session and you will seek reimbursement from your insurance provider directly. Your insurance provider will reimburse the portion of your fee that they deem reasonable based on your benefit plan. Before you start therapy you can ask your insurance provider what percentage or amount they are likely to reimburse based on your benefit plan. This can be helpful so you know what you will personally be paying for each week, and how much your insurance plan will cover.
There are a number of handy apps that can help you with reimbursement for a small fee or for free, as part of your insurance benefits.
Some therapists will “courtesy bill” to your insurance provider which means you will pay for your therapy at the time of service, your therapist will submit a claim, and you will receive a reimbursement check for the covered difference between what you paid and what your insurance will cover. These reimbursements may be processed quickly or may take a few weeks before you receive a reimbursement. You can ask your insurance provider what the expected date is for any reimbursements.
There may be an OON deductible that you need to meet before insurance benefits kick in. It’s important to know your deductibles up front as many people have high deductibles that must be met prior to coverage. It can be a shock to find out that none of your therapy is covered until you spend at least $3000. But don’t worry yet, deductibles and other benefits are covered more below so you can use your benefits wisely.
In short: You have more flexibility and choice with who you see. You will likely pay more of the bill than if you were to use an INN network provider. You must have a diagnosis for reimbursement.
INN - In Network
INN means In Network. This means that your therapist has a pre-negotiated contracted rate with your insurance provider for any services provided. The benefit to you is that you can use this provider and your insurance will cover the bill outside of any copay and deductible you may have. Some of the challenges are that in network providers may be full, may not provide specialized care, or may not be the therapist you would prefer to work with. Additionally “phantom networks” are a common trend, and a challenge that can add months long delays between when you want to start therapy and when you can actually get into seeing an In Network therapist. You may also have a deductible and copays that you are responsible for before your insurance provider will pay the balance of your bill.
Typically you use this benefit by providing your insurance card to your therapist and your therapist bills your insurance directly. You pay a copay at each session and no more as long as your insurance provider approves that your treatment plan meets medical necessity. Your insurance provider has access to your progress notes, payments, diagnosis, and treatment plan, and can approve or deny any treatment based on their determination of medical necessity. They may only cover certain types of therapy or a certain amount of sessions.
In short: You have less flexibility and choice of who you see but your insurance provider covers most of your bill outside of deductible and copay for any medically necessary care. You must see a provider who is contracted with your insurance plan. You may not like the options available to you, and your therapist may not be compensated adequately by your insurance provider for the care they provide. (This is usually why there are less In-network therapists available. Many insurance companies currently do not adequately pay therapists a fair and reasonable rate.)
Private Pay
A therapist that is truly “private pay” will not provide a medical receipt for reimbursement as they do not have any relationship with your insurance provider. The service is completely confidential, no diagnosis or “medical necessity” is required, and therapists have the flexibility to provide the care to you that they recommend without limitations from 3rd parties such as insurance providers determining what qualifies as “coverable”. The benefits of this are that you get to have more control over your care: how often you go, how long you go to therapy, and how you spend your session time. You do have to pay fully out of pocket with no expectation that your sessions will count toward your insurance deductible or reimburse any part of your care.
It may still be possible to use insurance benefits such as an FSA, HSA, EAP, or preventative/wellness incentives to cover some of the cost of these sessions. But this information is very nuanced so it is important for you to ask your insurance plan customer service what the details are of your plan and how you may be able to use these benefits if you choose to see a private pay therapist.
In short: With private pay there is no relationship between you, your therapist, and your insurance provider. Your therapy and your insurance do not inhabit the same worlds. You have full autonomy and control over your care, as well as full responsibility for any fees associated with your care.
HMO - Health Maintenance Organization
One of the first things you want to do to start understanding how to use your benefits for therapy is to determine if your insurance coverage is under an HMO or PPO. This is usually indicated on your insurance card, on your benefits plan paperwork, and on your insurance provider’s website. Get familiar with this so that you can get the most from your benefit plan.
An HMO is a Health Maintenance Organization. In my work as a therapist this is generally a stopping point where I have to refer you back to your insurance provider to get a list of contracted therapists. With an HMO you cannot use an out-of-network provider unless you want to privately pay for your therapy. You must use an in-network provider to receive the benefits of your insurance plan.
This has come up with clients I have seen and sometimes this is where a “phantom network” show up, so lets address that now.
A phantom network is when an insurance provider says they have a list of in-network providers for you to use, but the list of providers is full and you are unable to get into a therapy session within a reasonable amount of time. Let’s be real, if you are struggling with anxiety, depression, or have had a recent traumatic experience, waiting 6 months to see a therapist is only going to exacerbate your symptoms and can leave you feeling frustrated or hopeless about getting the help you need.
Your insurance provider in an HMO is required to provide you with in-network therapists within a reasonable amount of time, but those lines are not always clear. Sometimes I have been asked by clients and their insurance providers to complete a “Single case agreement” where I am asked to go “under contract” to see a client with an HMO who is unable to find an in-network provider with openings. As a therapist this a difficult spot to be in because I want to support my clients and my community with accessible mental health care, but the limitations of the contract make it impossible for me to agree to the terms and thus I cannot support clients with an HMO and address my needs as a business owner. Sadly I have to refer my clients back to their HMO or the state insurance commissioner to support them in accessing the care they need.
In short: HMO means you have a list of in-network providers you can use under your plan. You likely have a deductible and co-pays but your plan covers most of the bill if you use an approved provider. You cannot use OON providers under your plan. If you choose private pay you have the most control and must pay fully out of pocket. You may experience “phantom networks” or limited lists of who you can see, what treatment you receive, and duration of care.
Work Around: I’ll bring this up again later, but one way I have been able to support clients with an HMO is as follows:
You can choose to opt out of using insurance benefits and pay for therapy privately, out of pocket. (You do have a right to use your insurance benefits so you must opt out if you choose not to use your benefits for care).
I provide short term non-medical counseling for anyone who needs it at a reduced rate. If you have an HMO and your plan has you limited to seeing an in-network therapist who can’t get you in for 3-6 months you can choose to see me or another therapist in the interim until you are able to get into an in-network provider. I realize this can be challenging to start with one therapist and transfer to another but it may be helpful to reduce some of the intensity of your symptoms, help you learn some coping skills, and create a treatment plan that you can then take to your in-network therapist to have more focus once your benefits are available. And for many people seeking therapy it may be all you need to get through your current level of anxiety, depression, or relationship distress. You may find that 6-12 sessions over 3-6 months is all you need to get back to feeling good. This is often close to the amount you might pay for standard deductibles so your insurance benefits might not even kick in before you have completed therapy.
In short: If you have an HMO but can’t get in to an in-network provider, you can opt out of insurance benefits to work with an out of network or private pay therapist. Check your deductibles, availability of in-network therapists in your benefit plan, and fees for 6-12 sessions of private therapy. You may just find that your out of pocket costs are the same, but you can get in to see someone sooner than if you go through your insurance plan.
PPO - Preferred Provider Organization
A PPO (Preferred Provider Organization) plan is one where you have more freedom to choose an in- or out-of-network provider. This means that your insurance will cover more of the cost of therapy for one of their preferred providers (who has a contract for in-network care) or will pay a lesser portion for an out-of-network provider of your choice. This is the plan I typically prefer as a patient/client because my insurance benefits will cover some of the cost (usually between 30%-50% in my experience) and I will pay the difference. You may have different deductibles for this care, so it’s important to check. You also get more choice about who you want to see for therapy. You can call anyone you find online, or take personal recommendations from friends or family. If you see a sign or advertisement or meet a therapist and want to work with them, you can, knowing that your insurance will cover a smaller portion of the cost, but that you will be working with someone you found and want to work with based on your own choice.
I like the flexibility of being able to keep or choose a provider that I like working with (even if my insurance benefits change due to a change of jobs, change in insurance plans from year to year, or if I were to move), rather than having a short list of approved providers. For me, it is worth putting some of my HSA or FSA funds or private spending to this type of care.
In short: PPOs are the most flexible if you need or want to use insurance benefits, but also want your choice of providers, and are willing to pay a portion out of pocket. Perk: you can still use insurance benefits to cover some of the cost, and if you have an FSA or HSA you may have pre-tax funds already set aside to pay for this, so it won’t necessarily be coming out of your personal bank account. Learn more about how to use FSA and HSA benefits to pay for therapy below!
The Basics: deductibles, HSA, FSA, EAP deductibles, premiums, and medical necessity
Okay, so we have defined some of the common abbreviations for different pieces of the insurance puzzle. We are going to cover a few more as we continue to unravel the mystery of modern insurance benefits.
HSA -Health Savings Account
I’m still learning about the benefits of a Health Savings Account but from what I’ve learned so far, I love it! Your HSA is a benefit some employers provide that allows you to take automatic deductions from payroll before you get your paycheck. The individual limit to this plan for 2023 was $3,850 and for 2024 is $4,050. This is doubled for families. You can choose how much of your paycheck you want to contribute to this account each year up to these limits. An equal portion of this money is taken out of your paycheck each month before taxes which can reduce your tax burden.
You can use this money for any planned or unplanned medical expenses during the year, and any money you don’t use can be carried forward for future medical expenses or as a long-term savings plan. Since this is your money you have a lot of flexibility with how you use it. My plan even allows me to invest the money in my account to further grow the money I put in there. Most plans also provide a debit card you can use to pay for medical expenses (such as copays or balances), or have an app you can use to submit reimbursements. It’s super handy and creates a targeted savings account for expenses. This can be an excellent way to make the most of your insurance benefits and pay for therapy. Check with your plan to see what limitations or deductibles there may be prior to being able to use these benefits.
In short: There are many benefits to using an HSA for medical costs. In addition to being a savings account, it is also a great way to reduce your taxes, and invest or grow your money. Check your plan for limitations and deductibles, but this is a great way to make the cost of therapy feel a little less painful, and make the most of your benefits plan. Your HSA may be one way to pay for deductibles and copays.
FSA -Flexible Spending Account
I’ll admit this account was one of the hardest for me to wrap my head around, but once I figured it out, I realized how useful it can be for my own mental health and wellbeing. So your FSA (Flexible Spending Account) is also often called a “cafeteria plan”. With this benefit you have to do a bit of legwork up front, but with a phone call or two and a calculator you can decide what medical/therapy/or dental expenses you may have in a year, see what your FSA covers (or any limitations to spending), and make a plan for your care and payment. There are some important things to know about FSAs that deserve special attention:
You must designate the amount of money you plan to spend for the year when you enroll in insurance benefits or during open enrollment. This means you must decide what services you will need during the year, an estimate of how much they will cost, and then designate how much of those costs you want to be contributed to your FSA and deducted from your paycheck.
You can make some calls to providers to get estimates for the care you want to receive. So for therapy you might make a consultation call to find out about fees and estimated length of treatment for whatever concern you would like to address in therapy. Your provider will give you an estimate of fees and services called a “Good Faith Estimate” and you can use this to do some budget planning. You can contribute up to $3,050 in 2023 and $3,200 in 2024 for an individual. You have to spend this money during the same year or you lose it. The money is “front loaded” into your FSA so you have all of the money available to you up front for deductibles, copays, or other qualified medical expenses. This can be very helpful to cover expenses at the beginning of a new year when you have to pay down a deductible for care.
It is pretax so it also reduces your tax burden and can be a great way to pay for planned expenses if you don’t have the money “up front” in your personal accounts. There may be some limitations such as with an LFSA (Limited Spending) or other designations. Know which plan you have and what the limitations are.
It bears repeating: if you do not spend the FSA “cafeteria plan” money in the same year you will lose it. There may be a small portion that you can carry over, and you do have up to 3 months after the year ends to submit claims but all services must be within the same calendar year of your plan and reimbursement may take some time. Often these plans come with a debit card or app to make payments easier. Keep your receipts for proof of medical necessity.
In short: An FSA may be a great way to “front load” your medical savings to have money available at the beginning of the year for any deductibles, copays, or planned medical expenses. You must use this money in the same calendar year or you will lose it. Know any limitations to your plan and call providers in advance to get estimates of the cost of care you would like to receive for the year. This will give you a good idea of how much you want taken out of your paycheck each time to cover the cost of these expenses. You have access to this money as soon as your first day of enrollment in benefits or January 1 each year you enroll.
EAP - Employee Assistance Program
EAPs are often underused and can be misunderstood. I always encouraged friends, family, and anyone who calls me to consider using their EAP if they have smaller concerns, need to see someone quickly for short term counseling, or are waiting to get into another provider for therapy. So I want to share some info that may help you realize what a great benefit this can be for mental health care.
EAPs may have different names, so check with your employer about what preventative or supportive mental health care they offer. Nowadays I am seeing more companies providing in-house therapists for mental health care, but sometimes these services are contracted out to providers off-site. Your employer or benefit plan pays for coverage for all employees to access this mental health service (and sometimes other legal, professional, or financial services as well!) and you can access it by simply calling or emailing the listed EAP provider. There may even be an app for online appointments.
I’ve used EAPs a handful of times and have always had good experiences. The providers are licensed professionals and usually provide brief, non-medical counseling for a variety of concerns including but not limited to: relationship issues, employment stress, and a variety of other non-medical concerns for any mental health challenges you may be experiencing that do not meet diagnostic criteria for a mental health diagnosis.
With the increase in awareness of therapy and mental health conditions, many more options for preventative and non-medical counseling are showing up in private and public settings that offer options for people to take care of mental health concerns before they become a diagnosable mental illness. The good side of this is that prevention and proactive care can reduce the intensity or recurrence of mental health conditions. The challenging side of it is that the gray area of what insurance covers or doesn’t may cause some difficulty with using insurance benefits or finding a provider that can help you if you don’t meet diagnostic criteria for a medically necessary treatment. This is where a private pay therapist or EAP can be very helpful in supporting your wellbeing without providing a diagnosis that insurance carriers require.
In short: EAPs and other non-medical counseling are great ways to get preventative mental health care, and can be used for any counseling or concern that does not meet requirements for a mental health diagnosis. Many issues fall under this category such as: relationship issues, couples counseling, family or marriage counseling, sex therapy, work stress, moving, life changes, grief processing, and more. There are many apps and companies as well as private pay therapists that can provide this service for you. Your employer may offer an app or service, or you can find them online by googling “EAP” or “private pay” or “non-medical counseling”. Fees are often at a much lower or reduced rate for this service.
Deductibles
I’ve had conversations with clients and potential clients many times about deductibles and how they are an area of insurance benefits that can be pretty frustrating when someone is seeking mental health care. Deductibles are what you pay before your insurance benefits kick in. They often “restart” each year, so at the beginning of the year you will have an annual deductible to pay before insurance will pay for services. And they sometimes have a different amount based on if you are an individual, couple, family, or even for different services like medical deductible, dental deductible, and mental health deductible. There may also be a different deductible for in network or out of network services. So it’s important to know what your annual deductible is (and when it resets—often on January 1) and if you have a mental health deductible (outlined in those fine details on your insurance provider’s website or in the plan paperwork they provide).
Depending on your plan your deductible may be as little as $0 or it may be as high as $5000 or more. As a patient and therapist I have seen my personal insurance deductibles be reasonable and I have seen some where it made more sense for me to pay out of pocket and not use insurance benefits because the cost of care was never going to be more than the insurance deductible so it didn’t make sense for me to even use my insurance benefits. I could easily go see someone I wanted to see rather than try to fit into the requirements of my insurance plan.
When I work with clients on figuring out this benefit, we look at their deductible and calculate the estimated number of sessions that may need (and the max they would need) to have their deductible met and their benefits start to be used. So far, more often than not, their deductibles were so high that it didn’t make sense for them to use insurance benefits and they were able to start seeing me for therapy because the cost of their therapy was less than the priceline of their deductible. They were sometimes able to use HSA benefits to help pay for the out of pocket expenses for therapy, but often the deductible was still not met prior to the end of the year so a private pay option made more sense.
In short: Check your deductibles closely before deciding to use insurance benefits for mental health services. Check to see if there is a specific mental health deductible, and what the price point is for your deductible (and if it is in or out of network) and then calcultate the cost of therapy you plan to use in the year. You may just find that it is more beneficial to use a private pay therapist of your choice than to use your insurance benefits.
Premiums
Premiums are the annual amount that you usually pay monthly (or bimonthly) for your insurance benefits. It often comes out of your paycheck if you use an employer sponsored insurance plan. This is the amount that you pay “upfront” for your insurance benefits, and is separate from the deductible, copays, and other costs of insurance. Generally, a higher premium means a lower deductible and possibly lower copays and better benefits. A lower premium usually means lesser benefits, higher deductibles, and higher copays and out of pocket costs.
In short: Check your premiums, deductibles, copays, and out of pocket costs to determine your benefits and best decide what to use for mental health services.
Medical Necessity
When it comes to insurance reimbursement for psychotherapy services, “medical necessity” is the term that is used when an insurance provider determines whether your therapy will be covered or not. Many insurance providers are becoming more open to covering more treatment for longer periods of time. (In the past 6-12 sessions may have been the limit but some are extending this to 30 sessions or no termination date as long as “medical necessity” is apparent.). But medical necessity is determined by a diagnosable mental health condition such as a code used in the Diagnostic and Statistical Manual (DSM, of which there are many versions, so the latest version is the correct one to use). And this opens up a whole can of worms about mental health criteria and leaves a lot of gray area for insurance providers and mental health practitioners to disagree over what is covered, what is fraud, and what the terms actually mean.
The basics though, are that insurance covers conditions that are diagnosable as a mental health disorder, and covers treatment that is “evidence-based” (another term with a lot of gray area and room for interpretation). So if want your insurance to cover your treatment, you must be given an assessment that will determine if you have one or more mental health disorders, and you must use a treatment protocol that falls under your insurance provider’s definition of “evidence-based”. If I’m making this sounds like a bad thing, it is not. It is just one area of this system that a lot of people (clients, patients, providers, and clinicians) all struggle with understanding and using effectively.
In short: If you want to use insurance benefits in good faith, plan to receive one or more mental health diagnoses by professional assessment and plan to use a treatment plan that is evidence based. This may mean that therapy looks different than you expect or it may mean you need to ask more questions of your provider to ensure your insurance will cover their services.
How do I make the most of my benefits?
So now that we’ve covered a lot of the basics, how do you make your insurance benefits work for you?
Understand the terms of your insurance
It’s not fun, but taking an hour or so to read through your benefits plans or watch the video they share with you can really help you get the most of your benefits. It’s worth the time investment for the headache and frustration you will save later.
Choose a benefit plan that works for you
Picking the best plan for your personal life circumstances will ensure that you know what benefits you have and can make the difficult decisions when the time comes. Plan for the unexpected and make sure the insurance you have mitigates the level of risk you are willing to take. After all, insurance is just a risk mitigator for life events. If you have money saved for the unexpected and/or are generally safe, you can choose to have less insurance, a lower premium, higher deductible, etc. But if you are risk averse, have more family, less savings, are accident prone, etc. you may want to have a better plan that has higher coverage for those unexpected events.
Most insurance providers have handy tables and visuals to walk you through the differences between plans so you can compare them side by side.
Choose a provider that works for you
When choosing a doctor or mental health provider, don’t just go with the one your insurance provides. Do some research and find the best one for the need you have. Look at online directories like Psychology Today, Therapy Den, or the dozens of others out there. Look at all the options your insurance offers such as psychiatrists, psychologists, social workers, counselors, nurse practitioners, EAPs, apps, etc.
Don’t go with the first one, go with the best one. Maybe someone you know had a good experience with someone. Maybe the therapists you search have a specialty in the need you have such as couples counseling, sex therapy, grief and loss, etc. You are trusting this person with your mind and mental health, make sure they are trustworthy and are able to take on the big task of helping you through your emotional or behavioral challenges.
Know when it is better to either use your benefits, or pay privately, out of pocket
Do the math and trust your instincts to help you determine if your insurance benefits are needed and worth it for your mental health counseling. If you need just a session or a few, you may want to just pay out of pocket and save yourself the headache of insurance benefits and reimbursement. You will have more privacy and more leeway to experience therapy in a way that works for you and without someone else’s agenda.
But if you think that insurance benefits will be helpful in covering the costs, then you may want to pick a provider and a plan that will help you get the most of your insurance benefits. Many counselors are willing to walk you through the options if you have the information you need about your insurance benefits.
Know that you can change your mind at any time, and you can change your benefits at least annually or with a “life changing event” such as birth, marriage, divorce, etc.
If you find yourself stuck with a provider or a plan that you don’t like, mark your calendar for when you have “open enrollment” and can change your plan. This goes for mental health providers too. You are not committed to any one therapist and you can change at any time. Some people don’t realize that but the therapeutic relationship is like any other relationship when it comes to starting and stoping. You can break up if it’s not working for you and find someone else. Like all relationships, you deserve to be in a relationship that feels safe and trusting and valuable to you. Many years ago a friend told me that their therapist told them “Relationships are functional”. While a somewhat blunt statement, it is also true. If it’s dysfunctional, end it and move on to something else.
Know that you are ultimately responsible for understanding and using your benefits effectively to receive payment for the services you receive.
In the end, it is all up to you. But you can make the decisions you need to care for your health in a way that works best for you.
I hope you found this helpful. I’ve had this conversation so many times over the past 25 years that I wanted to put it out there for others who may have questions and need answers about how to navigate the insurance maze.
If you have other questions, would like to talk more about this, or are seeking a therapist, I hope you will reach out to me. I provide consultations, psychotherapy, interviews, and assessments all to support mental health and wellbeing. Good luck and good health on your mental health journey!
