This Month’s Expert: Insurance Issues in Psychiatry by Steven Sharfstein, MD

TCPR: Psychiatric treatment has been discriminated against by insurance companies for years. The recent passage of historic parity legislation may change this. Can you bring us up to speed on the history of this difficult relationship between insurance companies and psychiatrists?

Dr. Sharfstein: The first problem is that when insurance was invented in the U.S. in the 1930s, psychiatric care was excluded. Why? Principally because there was a state hospital system. The presence of the public sector meant to employers and others that there was someone else to foot the bill. That has been obstacle number one, and it has never entirely gone away.

TCPR: How does this still play out?

Dr. Sharfstein: Take HMOs, for example, where the tradition has been a 20 visit maximum. Why? The insurance companies seemed to think that if more than 20 visits were needed, the patient belonged in a state hospital. The second historical problem is typified by the experience of the Actors Equity union in New York, which, in the 1950s, provided comprehensive mental health insurance. It covered all outpatient services including psychoanalysis, and every actor went into psychoanalysis. The plan went broke in no time flat. This entered the lore among insurance carriers, and they became convinced that you could not cover outpatient mental health because it was very costly, you couldn’t decide who needed it, and there was no way to manage the benefits.

TCPR: Given these obstacles, what led to the passage of parity legislation?

Dr. Sharfstein: Well, there was a 25 year effort to get the parity act passed. It’s now called the Domenici Wellstone Parity Mental Health and Substance Abuse Nondiscrimination Act. It’s clear that mental health benefits can be managed properly; the Federal Employees Benefit Program has been a kind of national model.

TCPR: Wasn’t there a parity act passed 10 years ago?

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Dr. Sharfstein: Yes, it was a kind of forerunner of the current one, but it was weak. It required parity for annual limits and lifetime limits, but within that you could have higher copayments and higher deductibles for mental health, and most companies added these limits. This current parity bill won’t let that happen. So this means that not only annual and lifetime limits, but also copayments, coinsurance, deductibles, and out of pocket expenses can’t be any more restrictive than those for medical and surgical services.

TCPR: Is this the big fix that you think we need?

Dr. Sharfstein: I think it is very helpful, but it is not necessarily the big fix for a couple of reasons. The act allows companies to exclude specific diagnoses, and the one they really want to exclude is substance abuse treatment, which doesn’t make a lot of sense, since the bill itself is called the Mental Health and Substance Use Nondiscrimination Act. The other concern is that insurance plans may drop mental health coverage altogether to avoid having to pay for parity, but I think this would be hard to do politically.

TCPR: Will the parity bill have any effect on reimbursement rates for psychiatrists?

Dr. Sharfstein: Probably not, and this is a problem, because currently about 50% of U.S. psychiatrists do not participate in any insurance, because the fees they pay are very low. And psychiatrists have found that there is a large group of people who are willing to pay out of pocket and so they don’t have to deal with these fee restrictions, nor do they have to deal with the insurance paperwork and phone calls. Another advantage is that patients can be assured of confidentiality, since without insurance there is no need to write treatment reports that go into a file somewhere and may be seen by the wrong eyes.

TCPR: Why do insurance companies undervalue the work that psychiatrists do as therapists?

Dr. Sharfstein: There are several reasons. One is the overall devaluation of mental health care because of stigma. But the issue of psychiatrists doing psychotherapy is an economic one. There are plenty of psychologists and social workers out there who are very happy with the fees paid by insurance companies.

TCPR: But wouldn’t psychiatrists argue that they can provide better treatment?

Dr. Sharfstein: Yes, and we do. We have the medical training, and therefore we can provide both the medication and the therapy treatment. We certainly can manage very difficult patients better than others. I think that smart consumers want to go to the best trained and most competent people especially when it comes to serious life-threatening illnesses such as severe depression, borderline personality disorder, and severe anxiety disorders. Because of this, psychiatrists do very well attracting cash patients.

TCPR: Are psychiatrists going to get bad PR for being the only specialty that doesn’t like to take insurance?

Dr. Sharfstein: First of all, it is not just psychiatry. There is a growing movement among primary care doctors who are starting concierge practices that charge patients a yearly out of pocket fee for all their care. But that said, yes, I think this trend does create problems because the big insurance systems can’t find psychiatrists for their panels, and that makes them angry. If the insurance companies raised their fees and hassled less, they would have more psychiatrists willing to participate.

This Month’s Expert: Insurance Issues in Psychiatry by Steven Sharfstein, MD

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This article was published in print 4/2009 in Volume:Issue 7:4.


APA Reference
Sharfstein,, S. (2013). This Month’s Expert: Insurance Issues in Psychiatry by Steven Sharfstein, MD. Psych Central. Retrieved on September 18, 2020, from


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Last updated: 12 Sep 2013
Last reviewed: By John M. Grohol, Psy.D. on 12 Sep 2013
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