The Ethics of Insurance
Why taking health insurance makes treatment less accessible for everyone in the end.
Public debates about mental-health access has centered on one familiar refrain: therapists should take insurance. The assumption seems intuitive: if more therapists accept insurance, more people should be able to afford care.
But the truth is more complicated. Insurance systems chronically underpay, overburden, and restrict clinicians. These conditions ultimately reduce access to therapy for everyone, particularly for the very individuals who depend on insurance the most.
Real advocacy requires confronting a difficult but essential truth: therapists aren’t the barrier—insurance structures are.
1. Low reimbursement rates push therapists out of network
A national analysis from Milliman found that behavioral-health professionals are reimbursed up to 23% less than medical providers for comparable services, contributing to nationwide shortages of in-network clinicians (Mark & Parish, 2024; Milliman, 2019).
Similarly, the Medicaid & CHIP Payment and Access Commission reports that low reimbursement rates drive chronic workforce shortages in behavioral health (MACPAC, 2023).
Low reimbursement rates can force therapists to increase caseload volume to stay financially afloat. Therefore, overloaded clinicians may struggle to provide well-prepared, attentive, and thoughtful care as well as increase their risk of mistakes, poor boundaries, and general burnout. (Spoiler alert: burnt-out therapists typically don’t provide good therapy).
For some therapists, private-pay practice is an ethical choice that allows them to keep caseloads at levels conducive to high-quality, attentive treatment.
2. Administrative burden cuts into clinical availability
Therapists who accept insurance must handle benefit checks, claim submissions, denials, appeals, and extensive documentation.
The American Psychological Association identifies administrative burden as a top factor driving therapists away from insurance participation per their practitioner survey (APA, 2024)
This is not just an issue for counselors and mental health therapists. (AC Health, 2021)
3. Insurance requires diagnosis and possible discouragement
To bill insurance, therapists must submit information to the insurance company that compromises client privacy. Many therapists feel ethically bound to limit disclosure.
They recognize that:
- Some clients do not want a mental health diagnosis on permanent medical records.
- Sensitive information shared with insurers can be accessed by third parties or affect future employment, security clearances, or insurance decisions.
- The mere act of sharing clinical details with entities outside the therapeutic relationship violates the ethical principle of confidentiality unless absolutely necessary.
One of these pieces of information that must be disclosed is a diagnosis, which the clinician must assign even when individuals seek therapy for non-clinical issues such as grief, stress, identity questions, or relational difficulties.
Diagnoses can also become part of a client’s permanent medical record within the medical system, and there are certain situations where this diagnosis unfortunately can be used against you. Some examples include if the client is applying for life insurance or long-term care insurance (as likely all medical records will be requested, which includes your mental health records, and certain diagnoses such as depression and mood disorders can result in increased rate or rejection), or if a client is summoned for a court proceeding such as for divorce or a custody hearing. Clients working to become U.S. citizens may face more difficulty if they have mental health diagnosis in their medical records as that can be a reason to label them “inadmissible.”
Additionally, because insurances only pay when they deem treatment "medically necessary," if you start to make progress towards your goals, your insurance may stop paying for therapy.
While some do feel positively about receiving a diagnosis (i.e. feelings of relief or validation), it is also possible that they begin to feel quite negatively about themselves (i.e. anger, confusion, and general
self-stigma) (Rabea et al., 2023). It is also possible that, if known, others may begin to look negatively at a person for having a mental health diagnosis.
A key therapeutic consideration is a client’s autonomy, and insurance’s forced labeling strips away the freedom to choose from the client and clinician.
4. Insurers restrict session length, frequency, and treatment types
Insurance companies frequently limit session numbers, deny certain modalities, or require repeated proof of impairment, can limit the length of treatment and can limit the frequency of sessions (KFF, 2023; NAMI, 2022).
These restrictions undermine the clinical judgment of therapists and interrupt the continuity essential for healing. Even when clients get an in-network therapist, the care may be insufficient or disrupted.
5. Insurance infrastructure was never built for mental-health care
Insurance systems were designed decades ago around acute, short-term medical interventions—not long-term psychotherapy.
Mental-health practitioners are forced to work within a structure fundamentally incompatible with their work as insurances can exclude coverage for specific treatment modalities even if they are evidence-based (AMA, 2022)
The benefits of paying out-of-pocket
Enhanced privacy and confidentiality: When you use insurance, a mental health diagnosis is generally required and becomes a permanent part of your medical record, accessible by the insurance company and potentially affecting future background checks or life insurance applications. With private pay, your information remains confidential between you and your therapist.
Flexibility and control over your treatment: Insurance plans often limit the number of sessions covered, the length of each session, and even the type of therapy modality used, based on what they deem "medically necessary". Private pay allows you and your therapist to determine the course, duration, and frequency of treatment based solely on your individual needs.
No mandatory diagnosis: Many individuals seek therapy for personal growth, stress management, or life transitions, which may not meet the criteria for a formal mental health diagnosis. Private pay avoids the need for a potentially unnecessary diagnosis on your record.
Reduced administrative hassle for your therapist means less of a wait to access therapy for you and others: Dealing with insurance companies can involve complex paperwork, pre-approvals, and potential claim denials. Private pay simplifies the process, often allowing for quicker access to care without delays. The less time your therapist spends doing admin, the more time they have to potentially see more clients.
Access to specialized care: Certain beneficial and innovative therapeutic modalities, such as IFS, Coherence Therapy, or nature-based therapies, may not be covered by insurance. Out-of-pocket payment provides access to these broader, more holistic options
Advocacy moving forward
Improving access requires systemic reform, including:
- Raising reimbursement rates
- Reducing administrative burden
- Enforcing mental-health parity laws
- Allowing therapists clinical autonomy
- Modernizing billing structures for behavioral health
Blaming individual clinicians distracts from the real issue: The insurance system must evolve to support quality, sustainable mental-health care.
References
AC Health. (2021). Admin work by therapists &
providers. https://ac-health.com/how-much-time-therapists-providers-waste-admin-research-blog/
American Psychological Association. (2025). Insurance challenges limit psychologists’ capacity to address ongoing mental health needs. https://www.apa.org/news/press/releases/2024/12/insurance-challenges-limit-psychologists
Kaiser Family Foundation. (2023). 2023 Employer Health Benefits Survey.
https://www.kff.org/health-costs/2023-employer-health-benefits-survey/
Mark, T. L., & Parish, W. J. (2024). Behavioral health parity – Pervasive disparities in access to in-network care continue. RTI International. https://www.rti.org/publication/behavioral-health-parity-pervasive-disparities-access-network-care-continue
Medicaid and CHIP Payment and Access Commission. (2023). Report to Congress on Medicaid and CHIP. MACPAC. https://www.macpac.gov/wp-content/uploads/2023/06/MACPAC_June-2023-WEB-508.pdf
Milliman. (2019). Addiction and mental health vs. physical health: Widening disparities in network use and provider reimbursement. Milliman. https://www.milliman.com/en/insight/addiction-and-mental-health-vs-physical-health-widening-disparities-in-network-use-and-p
National Alliance on Mental Illness. (2020). Mental health parity.
https://www.nami.org/advocacy/policy-priorities/improving-health/mental-health-parity/
Robeznieks, A. (2022, February 4). Insurer accountability on mental health parity is long overdue. American Medical Association. https://www.ama-assn.org/health-care-advocacy/access-care/insurer-accountability-mental-health-parity-long-overdue
Rabea, A. A. E., Mourad, G. M., & Mohamed, H. S. (2023). Stigma and its relation to self-concept among patients with mental disorders. Egyptian Journal of Health Care, 14(1), 279-298.
https://doi.org/10.21608/ejhc.2023.282510
Additional reading on this topic:
NPR:
https://www.npr.org/sections/shots-health-news/2024/08/24/nx-s1-5028551/insurance-therapy-therapist-mental-health-coverage
Seattle Times:
https://www.seattletimes.com/seattle-news/mental-health/wa-mental-health-providers-say-insurance-reimbursement-isnt-enough/
My personal opinion on insurance
As stated above, billing insurance requires me provide a lot of information, including a mental health diagnosis, to insurance.
Professionally, I do not believe someone needs a diagnosis to benefit from therapy. I do still take insurance, however, because I know that some folks wouldn't be here without it.
As a therapist, I do not want to pathologize people; I want to empower them. You are the expert on your life and insurance should not dictate if you are allowed to receive services.
Okay, but you still take insurance?
Yes, I do.
I hope to one day be able to support my practice without taking insurance, however, I cannot deny that insurance allows people to feel that mental healthcare is accessible. Society is not yet at a point where the majority belief is that paying out of pocket for therapy is worth it.
Therapy is not a priority for most Americans. And, of course, there are folks out there just as deserving of mental healthcare that could not afford to see a provider of their choice without the aid of insurance. It's a common and tough position to be well-off enough to have a job that gives you insurance, but to still not have enough to spend on yourself after paying the bills.
So what are you doing about all the issues with taking insurance?
I try to mitigate the risk to my clients as best I can while still working within the system. Folks are always able to opt out of using their insurance and paying out of pocket, but for those who don't, here are some of my strategies:
1) When choosing a diagnosis to report to put in your file that can be scrutinized by insurance, I will talk with you at length about the risks and benefits of what diagnosis I can attest to. I will always report what I feel is an accurate diagnosis, however, some diagnosis are likely less harmful than others. This is not how I personally think of them, but this is how they are viewed by the system at times.
2) In most cases I will only report one diagnosis and that will be our treatment focus. You may feel you have multiple diagnoses, but that isn't the business of the insurance company. That is your private information. If you want me to note all the diagnoses I believe are accurate for your situation, I will do so, it is simply my default to only mention one.
3) I keep my progress notes vague on purpose. This is also to keep your information as private as possible. My notes typically consist of one direct quote, some standard assessments, and vague yet specific and accurate descriptions of what we worked on and talked about.
For example, a direct quote may look something like, "I've been feeling more anxious lately."
An example of the standard assessments I make include reporting on a client's appearance, behavior, thoughts, speech, and mood. An example of this may look like, Client appearance was well kempt, attentive and engaged, thoughts were logical and linear, and speech was normal rate, rhythm, and volume. Client's mood was euthymic and calm throughout session.
It's not perfect, but part of life is doing what feels best within systems we did not create.
If you have any questions about anything I've written, feel free to reach out to me!
Warmly,
Megan
