In a series of court processes dating back to 2014, judges have examined how health insurance companies should balance their responsibilities to people seeking mental health care against their own financial interests (Wit v. United Behavioral Health, 2023, 2026). Insurance companies have financial incentives to limit reimbursements for services and maximize profits for shareholders. However, when administering certain employer-sponsored health plans,1 insurers have fiduciary duties requiring them to prioritize the interests of plan participants and beneficiaries over their own financial interests (cf., Employee Retirement Income Security Act, 1974). These obligations are similar, although not identical to the fiduciary responsibilities of psychologists and other mental health professionals (MHPs) to their clients (ACA, 2014; APA, 2017; NASW, 2021).
Ordinarily, access to mental health treatment should be based on patient needs and wishes (Olejarczyk & Young, 2024). Health insurance is intended to facilitate access to covered services, including psychotherapy, inpatient care, outpatient treatment, and other mental health and addictions services. But what happens when an insurer's financial interests conflict with its responsibilities to the people it insures?
What Are Generally Accepted Standards of Care?
Generally accepted standards of care refer to clinical principles and evidence-based treatment guidelines broadly recognized by mental health professionals as appropriate for assessing and treating patients (Wit v. United Behavioral Health, 2023). There is no singular set of standards of care that apply to all contexts of practice or all treatment decisions. Standards may vary for particular mental health concerns, diagnoses, and client situations. Across various types of treatment decisions, however, accepted standards of care should typically:
- address underlying conditions rather than simply stabilize immediate crises;
- consider co-occurring disorders;
- provide treatment at a safe and effective level of care; and
- tailor treatment duration to individual needs (Wit v. United Behavioral Health, 2023).
Importantly, clinically appropriate treatment may include services that maintain functioning or prevent deterioration, even when patients are not experiencing an acute crisis (e.g., suicide plans). In Wit v. United Behavioral Health (2023), courts explored whether the insurer's internal guidelines were more restrictive than these standards and whether financial considerations improperly influenced its coverage policies. However, treatment consistent with generally accepted standards of care is not necessarily covered under every insurance plan. To determine what is or what is not covered by a particular insurance plan, one needs to look at the terms of the plan, as well as relevant healthcare insurance laws.
What Are Possible Reasons for Denying Coverage?
Insurance companies may provide a variety of reasons for denying insurance coverage. For example, insurers may refuse continued hospitalization because a patient's immediate crisis has stabilized, deny further psychotherapy because symptoms are not improving, or require patients to try less intensive services before authorizing the treatment their clinicians recommend. Insurance companies may determine that a particular type of treatment is not medically necessary; they may require prior authorization for particular services; or they may have restrictions involving providers or facilities where services may be obtained (U.S. Department of Labor, 2016).
Other denials may involve arbitrary limits on treatment duration, failure to consider co-occurring disorders, overly restrictive definitions of medical necessity, or insufficient access to qualified in-network providers. Although some restrictions are permitted under insurance contracts and applicable law, others may be inconsistent with generally accepted standards of care or federal mental health parity requirements (described below).
Treatment decisions and insurance coverage determinations should consider each patient’s individual clinical needs and circumstances, rather than rely on arbitrary or overly restrictive criteria (e.g., limiting inpatient treatment for patients with suicidal thoughts to a predetermined number of days).
How Do Mental Health Parity Laws Apply?
The Mental Health Parity and Addiction Equity Act is intended to protect patients against discriminatory insurance practices. Under these federal laws, covered health plans generally cannot impose more restrictive financial requirements or treatment limitations on mental health and substance use disorder benefits than on comparable physical health care, medical treatments, and surgical benefits. These protections extend to certain practices involving prior authorization, medical necessity determinations, and other restrictions on access to care. Accordingly, an insurance company's coverage guidelines may raise legal concerns not only when they conflict with generally accepted standards of care, but also when mental health benefits are administered more restrictively than comparable medical benefits (U.S. Department of Labor, 2016).
What Can Patients and Clinicians Do When Coverage Is Denied?
When insurance coverage is denied for particular services, patients and their clinicians may consider what steps to take to appeal the decision (U.S. Department of Labor, n.d.). Patients can request written explanations of denied benefits (U.S. Department of Labor, n.d.), obtain the insurance company’s guidelines used to make coverage decisions, and appeal denials through their insurance plans. If an internal appeal is unsuccessful, they may be entitled to independent external review. Note that a denial is not automatically unlawful simply because a treating clinician disagrees with it. Clinical appropriateness, relevant laws, and the terms of the insurance contract must also be considered.
Challenging insurance company decisions can be challenging, particularly for clients who are already experiencing anxiety, depression, distress, or other mental health concerns. They may need assistance from patient advocates, clinicians, or family members.
Clinicians can help clients by accurately documenting their clinical needs, explaining why recommended services are medically necessary, and providing research evidence based on generally accepted standards of care. When interacting with insurance companies, clinicians should use conflict management strategies and skills, including active listening, option generation, clarification, and problem-solving (Barsky, 2017).
When denials create risks to patient safety or continuity of care, clinicians should also explore expedited appeals and appropriate interim treatment arrangements. Patients may seek assistance from their employers (human resources), state insurance regulators, the U.S. Department of Labor, or legal counsel when they believe an insurer has violated applicable laws or improperly restricted access to care.
Note that denial of coverage may be technically consistent with an insurer's internal policy yet still raise questions about whether that policy itself was developed appropriately. As in the Wit case, it may be necessary for one or more patients to hire attorneys to challenge insurance policies that violate relevant laws.
Although insurance can facilitate access to needed mental health services, patients, their clinicians, and other support systems often must advocate for coverage when insurers initially deny treatment. Ultimately, the responsibility for ensuring access to appropriate care should not rest solely on those seeking treatment, but also on the insurers entrusted with administering their benefits fairly and responsibly.
Footnote:
- This article focuses on employer-sponsored health plans. Laws and processes related to Medicare and Medicaid may differ.