The Woeful Underfunding of Psychotherapy by Health Insurers

This article originally appeared at Mad in America on April 24, 2018.

Americans are well aware that their health insurance premiums have increased steadily in recent years. The data substantiate it. According to Mercer’s 2017 National Survey of Employer-Sponsored Health Plans, large employers have absorbed a 3 percent annual increase in health insurance costs over the past five years, and will be hit by a 4.3 percent increase in 2018. What people aren’t privy to is that psychotherapy reimbursement rates have been stagnant or in decline for several decades, even though insurance premiums have risen sharply. This is mystifying given that the vast majority of people afflicted with anxiety and depression prefer psychotherapy over medications, science shows it rivals or even exceeds the benefits of medications, and it yields a “medical-cost offset,” or saves insurance carriers money on avoidable medical costs.

“Seventy-five percent of participants expressed a preference for psychotherapy over drugs.”

Let’s begin with some data that highlights clients’ preference to talk with a professional about their psychological problems than take medications. Several years ago Kathryn McHugh at McLean Hospital in Massachusetts and a handful of colleagues analyzed 34 studies involving over 90,000 people who were asked to select a straight preference between psychotherapy or psychiatric drugs to address their psychological needs. Seventy-five percent of participants expressed a preference for psychotherapy over drugs. Clients are also more likely to refuse drug therapy than psychotherapy when given a choice of treatments—about two times more likely—according to a 2017 article in the journal Psychotherapy. Co-author, Roger Greenberg, of SUNY Upstate Medical Center, went on record: “Our findings support that clients are more likely to be willing to start and continue psychotherapy than pharmacotherapy.”

An exhaustive list of highly-regarded studies buttressing the effectiveness of psychotherapy put out by the Council of Representatives at the American Psychological Association can be easily accessed online. It highlights how the benefits of psychotherapy tend to endure longer than those brought about by medication use alone, how they often accentuate those obtained from medication use, and contribute to a host of favorable outcomes such as reduced disability, enhanced work functioning, fewer costly psychiatric hospitalizations, and fewer unnecessary medical services and surgical procedures.

Long-term, in-depth psychotherapy, where clients are allowed to settle in and talk at length about their past and present emotional difficulties with significant others, even has some impressive scientific backing. The latest findings of the Tavistock Adult Depression Study (TADS) show that 44% of depressed clients who were provided 18 months of weekly psychoanalytic psychotherapy no longer met the criteria for a depressive disorder two years after treatment ended, compared to 10% of those receiving standard short-term problem-solving therapies, or medications. Longer-lasting psychotherapy where clients delve into their personal history in deep ways has also been associated with significant savings in healthcare utilization and lost productivity. Dutch psychologist Caspar Berghout spearheaded a study in which two years after long-term psychotherapy ended there were cost savings in the $4,500 range per person, per year, due to decreased unnecessary utilization of medical services and higher work productivity.

Which begs the question: “How much psychotherapy is necessary to achieve adequate emotional recovery?” Michael Lambert, a leading expert on psychotherapy research outcomes from Brigham Young University, proposes that the most conservative estimate of the number of therapy sessions required for 50% of clients to show short-term improvement is 21. Yet, in the latest study of its kind looking at national trends in psychotherapy usage by Mark Olfson in the Department of Psychiatry at Columbia University, the average number of psychotherapy visits received by clients fell from 9.6 in 1998 to 7.9 in 2007. Up to 50% of clients discontinue after the first or second visit, and only about 16% attend the twenty-visit range associated with adequate benefit for most people.

The main reason why people in emotional need fail to receive acceptable amounts of psychotherapy is that too much of the cost is shifted over to consumers by insurance companies. A recent report by the risk management and health care consulting firm Milliman revealed that mental health services are four to six times more likely to be provided out-of-network than general medical or surgical services. In Washington, D.C. alone, about 63% of mental health related office visits were out-of-network in 2015. In a nutshell, what is occurring is that droves of psychotherapists are unwilling to contract with insurers because of low reimbursement rates, leading to a sizeable number of clients paying out-of-pocket for needed care, which pressures them to underutilize it for affordability reasons.

“The American Psychological Association estimates that about a third of psychologists refuse to take insurance, primarily because of low reimbursement rates.”

The American Psychological Association estimates that about a third of psychologists refuse to take insurance, primarily because of low reimbursement rates. How low are they? Blue Shield of California currently reimburses a client of mine $40 for a sixty-minute session, which is about half what a midlevel psychotherapist charged in the 1980s. When I was an Anthem Blue Cross provider a handful of years ago, I was notified that the customary payment for a forty-five minute session would be raised $2, to $94. This was the first rate increase in thirty years. The average third-party reimbursement by private insurers for forty-five minutes of psychotherapy is around $88, according to the analyses of Gordon Herz at the Forward Psychology Group in Madison, Wisconsin. That is about half the national average actually charged by psychologists ($163), and substantially lower than that of clinical social workers ($136)—numbers put out by FAIR Health. The $88 average third-party reimbursement rate for forty-five minutes of psychotherapy is about what Medicare pays. Yet, 2017 Congressional Budget Office data show that private insurers typically reimburse specialists about double the amount for common medical procedures compared to Medicare benchmark amounts.

Health insurers have the revenue to raise psychotherapy reimbursement rates to encourage experienced therapists to take insurance and become in-network providers, thereby lowering clients out-of-pocket costs and incentivizing them to receive an adequate length of treatment. In the second quarter of 2017 alone, Thomson Reuters I/B/E/S data indicate that the nation’s top six health insurers yielded adjusted profits of $6 billion.

Provider shortages in other fields, such as gerontology, have been easily addressed in the past by insurers increasing rates to attract an influx of specialists. It is imperative that insurers do likewise in the mental health field. Carol McDaid heads up the Parity Implementation Committee, an advocacy group championing the right of individuals and families with mental health problems to have full access to and coverage of services on par with that of medical problems, as laid down by the 2008 federal parity law. She is clear about the need to raise reimbursement rates for mental health professionals: “The plans have the capacity to do this. I just think the will hasn’t been there thus far.”