Insurers May Cover More Mental Health Costs Under New Federal Rule

Health insurance companies will be held to higher standards in providing mental health care under a new federal rule finalized Monday.

The new rule aims to lower costs and improve access to providers who offer care related to mental health and substance use. It revitalizes a 2008 law, the Mental Health Parity and Addiction Equity Act, which was designed to ensure that health insurance coverage for mental health conditions and substance use disorders is on par with coverage of medical and surgical care.

Despite the law, insurance companies have failed to provide enough coverage for depression, anxiety, addiction and other mental health conditions and in recent years the government’s standards haven’t been adequately enforced, according to the Biden administration.

"Too many Americans still struggle to find and afford the care they need," the White House said in a statement. "In 2020, less than half of all adults with mental illness received treatment."

By requiring private insurers to cover mental health care the same way they would cover physical ailments, the administration hopes to increase options for in-network providers and lower copays and out-of-pocket costs — ultimately helping Americans get the care they need for less. Advocates say this is a necessary step to address the country’s high suicide rate.

Insurance groups, though, have questioned the administration's authority to enforce the rule, and it's likely the insurance industry will contest the rule in court.

Insurers must cover mental health conditions under new rule

Under the new regulation, insurers will be held to stricter standards for their provider networks for mental health care. The benefits for mental health should be equal to what an insurance company provides for physical conditions.

It's a well-known fact that getting help for mental health issues and substance abuse is often expensive. The average cost for out-of-pocket health care among people with mental health conditions is $1,500, which is nearly twice the average for policyholders who do not have mental health conditions, according to a study that Neera Tanden, domestic policy advisor to President Joe Biden, cited in a press briefing.

Officials hope the new regulations will cut away at that disparity. "Insurers too often make it difficult to access mental health treatment, causing millions of consumers to have high out-of-pocket costs because they go out-of-network, or defer care altogether," the White House statement said.

Right now, many counselors, therapists and psychologists don't take health insurance at all, often citing low reimbursement rates from insurance companies. The goal of the new rule is to get insurers to contract with a larger number of mental health providers, increasing the affordable options to their patients. Companies are also supposed to assess how much they pay for out-of-network coverage.

Insurers will also need to examine how frequently prior authorizations — or approval requirements that healthcare providers must satisfy before providing care — are required for coverage of mental health and substance use disorders.

"There is no reason that breaking your arm should be treated differently than having a mental health condition," Biden said.

Some parts of the rule will go into effect next year for group health insurance coverage, with the full rule going into effect for all private insurance plans in 2026.

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