Mental Health Insurance and Billing, Explained

This page describes how the mental health care system in the United States is generally structured. It is not medical advice.

Mental health care billing and insurance involves multiple entities and uses terms that are not easily understood.

How Costs Are Determined

In mental health care, when insurance is used, exact cost of a service is often not known before an appointment.This is because what a patient ultimately owes depends on the interaction between the health care organization, the insurance plan, and any agreements between them.

Insurance Basics

Insurance works similarly in mental health care as it does in other areas of health care. A few key terms that commonly come up:

A deductible is the amount a person must pay before insurance begins covering costs. A copay is a fixed amount owed per service. Coinsurance is a percentage of the cost owed after the deductible is met. The out-of-pocket maximum is the most a person will owe in a plan year for covered services, after which the insurance plan covers 100% of covered costs.

What and how much an insurance plan covers varies by plan. Not all mental health services are covered by all plans, and coverage can change.

In-Network vs Out-of-Network

A provider who is in-network with a specific insurance plan means the provider and insurance company have a contract that often results in lower costs for the patient than out-of-network providers, who do not have a contract with that specific insurance plan. Whether a provider is in-network versus out-of-network for a specific insurance plan is not a reflection of the quality of the provider’s care.

Prior Authorization

Some mental health services require prior authorization, meaning the insurance company must approve the service before it’s covered by insurance. This process, and related processes such as denials and appeals, typically are handled by the provider/mental health organization and the insurance company.

Billing Codes and Explanation of Benefits

A mental health appointment is documented using standardized billing codes, most commonly CPT codes (Current Procedural Terminology codes), that identify the type of service that was provided for insurance purposes. After an insurance claim is processed, insurance companies issue an Explanation of Benefits (EOB), a document showing what was billed, what the insurance plan paid, and what the patient owes. An EOB is not a bill.

Self-Pay and Sliding Scale

Not everyone uses insurance for mental health care. Self-pay means paying for services directly without going through insurance. Some organizations offer a sliding scale fee structure, where the cost of services is adjusted based on income.

Want to Learn More?

The Mental Health System Toolkit and the Mental Health System Toolkit: Billing and Insurance Bundle‍ ‍define and explain billing and insurance processes terms in mental health care and provide tools for organizing billing-related information.