Medical Necessity and Mental Health: Understanding New Trends in Insurance Coverage for Mental Health Services

Medical Necessity and Mental Health: Understanding New Trends in Insurance Coverage for Mental Health Services

When you seek treatment for a mental health condition like depression, anxiety, or trauma, and you choose to pay with insurance, it works just like any other health condition. A claim is submitted to your insurance company, and they determine what portion of your bill they will cover and what portion you must pay out-of-pocket. While most insurance companies cover mental health services, this doesn’t mean they are guaranteed to cover every visit with a counselor. This is because when you submit a claim to your insurance company, they will determine whether or not the service was medically necessary. In some cases, they may deem that medical necessity is lacking, in which case, self-pay therapy is an option. Learn about this new trend in insurance coverage below.

What is medical necessity?

The term medical necessity is used to describe services that your insurance plan will pay for or cover. You should have access to a document that explains all the details of your insurance policy, including what services your provider deems to be medically necessary. In general, services will be deemed medically necessary if they fall under one of the following categories:


  • The service is provided to diagnose, treat, cure, or relieve a medical condition, disease, or injury,
  • The service is not simply a convenience for the medical provider, the person insured, or the person’s family.
  • The service is generally accepted in the medical community as constituting appropriate care for a given condition. 
  • The service is necessary to diagnose or treat a health condition. 


Laws in your state may also provide a definition of medical necessity. Contact your insurance company if you have questions about what services are covered under your insurance plan. 


How Medical Necessity Applies to Mental Health Care 

When you submit a claim for mental health services, your insurance provider will determine if the service was medically necessary. For instance, if you see a counselor or therapist for a session, your insurance company will only cover the session if they determine that it was medically necessary to treat a mental health condition.


In most cases, this means that you need to have a diagnosed mental health condition, per the Diagnostic and Statistical Manual of Mental Disorders, for your insurance provider to cover the service.  This is good news for people who are being treated for a specific condition like schizophrenia or bipolar disorder, but for those seeking supportive counseling to deal with a relationship issue or a temporary stressor, services may not be covered. 


Supportive counseling may not be covered under insurance plans, because the unfortunate truth is that difficulty coping with a life challenge, such as a child going away to college or a spouse’s affair, typically doesn’t fall under the category of a medical condition. Certainly, coping with these issues can be distressing, but this stress represents a normal human reaction to a negative situation not a mental health disorder. 


Without a diagnosis, it is difficult for your provider to bill for services, and the visit with the counselor or therapist may not be covered. 

Current Trends in Mental Health Law 

The new year may bring challenges for those seeking insurance coverage for mental health services. In 2019, a groundbreaking Court decision in Wit v. United Behavioral Health (UBH) required UBH to reprocess nearly 67,000 claims that it had previously denied for treatment of mental health and substance use disorders, because the Court determined UBH had denied care by using incorrect guidelines to determine medical necessity.


While this Court decision was positive, it was overturned in March 2022, and advocates, including the American Psychological Association, are concerned that the overturning will set a precedent that limits coverage of mental health services across the board. 


What this means for those seeking services is that insurance companies may be strict in their definition of what is deemed medically necessary, so supportive counseling may not be covered. If you find yourself in a situation in which counseling services aren’t covered, there are alternatives to using insurance. Some counseling centers offer payment plans, whereas others allow you to receive self-pay therapy with payment out-of-pocket with cash or credit card. If cost is a concern, some community mental health centers or state-funded clinics may offer a sliding fee scale based on income.


Bridge to Balance offers counseling services for both children and adults in New Jersey. If your insurance will not cover services, we are happy to accept cash, check, and credit card as payment. Visit our website today to learn more about us or to book an appointment. 





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