Surprised by a mental health insurance denial? Here’s what to know

Pierce County resident Jeff Castor was seeking mental health treatment for a family member who was struggling.

They found a facility covered by Castor’s insurance, but it was not the right fit. So in January, Castor and his relative tried a place outside of his insurer’s network. Castor, a commercial airline pilot, had Premera Blue Cross insurance, which he said reassured him on a phone call it would cover the treatment at 60%.

But while the treatment helped the relative immensely, Castor got some unwelcome news as the bills started coming in. Premera denied almost all of his claims. The reasons varied, from saying they had already processed claims for that treatment, to telling him the services requested exceeded what they were allowed to cover. Castor was stuck with about $54,000 in bills, of which the insurance company paid only $800.

“To rub salt in the wound, they sent me two bills saying ‘we paid too much,’ and wanted me to pay them $400 back,” Castor said.

Castor’s experience reflects a recurring problem for many seeking mental health treatment in Washington state and elsewhere – finding out their health insurer will not cover mental health treatment for which they thought they had already secured coverage.

A sampling of complaints to the state’s office of the insurance commissioner in the last two years shows that unexpected denials of coverage, especially when patients thought the treatment was previously authorized, was one of the more common reasons consumers have conflicts with insurers over mental health care.

Since October 2023, 21 people have filed such complaints related to mental health coverage. Kaiser Permanente and Regence Blue Shield were the most commonly cited insurers, with 13 complaints directed at Kaiser and three at Regence (both are also among Washington’s largest insurers). Jane Beyer, a senior health policy adviser for the agency, said there are likely more complaints of the same type.

“The system is so complex. If somebody’s got a kid who needs care, you’re focusing 100% on your kid. And if you want to appeal a denial or complain about something like that, it isn’t No. 1 on your to-do list. So we think we get an underreporting of behavioral health complaints,” she said.

Despite most of these denials being legal and within state and federal rules, patients say they were in the dark about what their plan did and didn’t cover. Mental health coverage can be particularly murky to navigate, since it often requires long periods of ongoing treatment and is not as visible as many physical health conditions.

Almost all dealt with “prior authorization” – meaning a patient must get approval for certain types of care before they receive the care.

Health insurers commonly cited a few reasons for the denials: care was deemed “not medically necessary,” the patient’s prior authorization expired, or the insurance company had made an error in approving care the first time.

Amanda Lansford, a spokesperson for Premera, said prior authorization feels like an extra step, but is applied in less than 2% of care and is used to control costs, provide safeguards for high-risk treatment and make sure treatments are clinically appropriate.

“It confirms the treatments and services our members receive are covered, safe and evidence-based and not redundant,” Lansford said in a written statement.

Still, patients who find themselves seeking out-of-network care often run into these problems.

David Lloyd, the policy director for the national mental health nonprofit Inseparable, said it is common to have to go out of network for mental health coverage – largely because insurers make it difficult for mental health providers to stay in network.

“Insurers simply don’t contract with most behavioral health providers,” he said. “The reason they’re not in-network is low reimbursement rates and deep administrative hassles.”

That in turn requires patients to seek out-of-network care, he said, for which coverage is often denied.

No surprises?

Washington and federal law state that consumers have certain protections for mental health care coverage, and from surprise bills in general.

But while rules exist to keep people from being hit with unexpected medical charges, they do not apply to all types of care.

The Balance Billing Protection Act, or the “no surprises” billing act, requires health insurers to pay for treatment not covered by a patient’s regular insurance – but only for certain services. That includes emergency medical care for physical and behavioral health issues, ground ambulance transportation or if a person has an appointment scheduled with a provider that is in their network, but has to unexpectedly be treated by an outside provider.

The state also has a law that prohibits insurers from denying care after they granted “prior authorization. But that authorization is often for a fixed time period, said Beyer, with the insurance commissioner’s office.

“So you’re authorized for those six months, but if after six months you go to that out of network provider, and you haven’t asked for another round of prior authorization, that initial protection doesn’t apply anymore,” Beyer said. “We think that when we were looking at several of the complaints that we got, unfortunately that was the case.”

Maria Coghill, Kaiser Permanente Washington’s executive director of regional mental health and wellness, said in a written statement that the company authorizes care with out-of-network providers “when necessary,” and “usually for a specific purpose or amount of time.

“These approvals are generally time-bound as our goal is to get each member the care they need. At times of significantly increased need for mental health care, in order to ensure our members get timely access to the care they need, we have referred members to these outside care providers,” Coghill said. She referred clients to Kaiser’s member services line for further questions about mental health benefits and coverage decisions.

Kaiser patients receive an authorization letter that includes the start and end date for coverage, along with the approved number of visits in the coverage, which usually lasts a year, Coghill said.

But in complaints to the insurance commissioner, some patients say their insurers never made a deadline clear.

Lansford, the Premera spokesperson, said sometimes out-of-network claims are only paid up to an “allowed amount,” which can be different from a billed amount. In situations like Castor’s, the provider may have billed for the difference between what Premera pays and what they charge – the practice known as balance billing.

“Without knowing the specifics of this member’s case, it may be that Premera agreed to pay 60% of the allowed amount, which is common under certain plan designs,” Lansford said.

She said the company is working to make prior authorization easier, including reducing the number of services that require it and using artificial intelligence to quickly approve claims. She said that technology is not used for denials.

Insurers often deny mental health coverage on the grounds that it’s not “medically necessary” – a term that, despite the name, is not determined by doctor recommendations but by private health organizations.

That method of determining whether someone’s treatment should be covered often leads to inconsistencies, with some insurers opting to cover something while others determine it is not medically necessary.

In one case outlined in a complaint to the insurance commissioner’s office, a patient’s therapist had referred them to a second doctor for treatment that the first could not provide. According to documents obtained by the Seattle Times, Kaiser, the patient’s insurer, denied the claim, stating that the person needed to be reviewed for medical necessity in order to see two therapists. They also cited that the person’s condition was “partly better,” so they could not approve coverage.

A state law passed last spring aims to hold insurers in Washington to stricter standards by requiring them to follow a uniform set of criteria approved by doctors for determining whether to cover mental health treatment.

“They ultimately will put in place much stronger requirements that health plans cannot just substitute their judgment for doctors, and they have to follow accepted standards of care,” said Lloyd, whose nonprofit helped pass that law.

That rule will take effect in January 2027.

What can patients do?

People who believe they have been wrongly denied mental health insurance coverage have some options.

Consumers can file complaints with the office of the insurance commissioner, which can ask a company to correct an action if it is against the law. They can also issue fines and, for particularly egregious violations, revoke an insurer’s license to do business in Washington, said Stephanie Marquis, a spokesperson for the office.

However, the agency’s powers of enforcement are limited. It only oversees plans for about 1.2 million of the state’s nearly 8 million residents – those that are “fully funded,” where employers pay a fixed price to an insurer in exchange for coverage for their employees.

Large Washington employers are typically “self-funded,” meaning the employers themselves take on the financial risk. Their insurance plans are overseen by the Department of Labor. Government-funded plans, like Medicare Advantage, are overseen by the Centers for Medicare and Medicaid.

Still, Beyer said, any resident can report problems to the insurance commissioner’s office – staff can refer people to the right agency and track patterns with various insurers. In particular, she said, the office has been encouraging mental health providers to submit complaints on their patients’ behalf.

Patients can also file an appeal directly with their insurance company. That can trigger a “peer-to-peer review,” in which another medical provider, typically selected by the insurance company, reviews the case.

If the insurer denies the appeal because it found treatment was not “medically necessary,” a patient can ask for an independent review organization, or a company separate from the insurer, to review the decision.

Nine of the people who complained to the insurance commissioner’s office had their denials overturned for at least some coverage.

In one complaint, a patient described getting authorized to see a counselor who was out of network, because their closest in-network provider was 35 miles away and had a six-month waitlist. The patient sought approval and provided a note from a primary doctor, and the insurer, Community Health Plan of Washington, told them it should be allowed. But the patient was denied due to being out of network.

After the patient filed a complaint, Community Health Plan approved the coverage, stating it had “reviewed the complainant’s address and network availability.”

While appeals are relatively uncommon, health care advocates say they are often worth the effort.

“There tend to be high overturn rates on appeal,” Lloyd said. Actually, I think it’s evidence that many of the denials are flawed in the first place.”