Insurance or private pay?
Mental health insurance problems come up when people have used their insurance to pay for therapy sessions, and then try to get private (also called "individual") health, disability or life insurance in the future. Once you use your mental health insurance for therapy, or get a prescription for a mental health medication from a regular doctor or psychiatrist, you have a mental health diagnosis on record.
The national data service, Medical Information Bureau (MIB), stores information on the health histories of patients who have ever applied for or have ever used insurance. Most insurance companies use MIB to get more complete underwriting information on applicants to decide who to accept or not, and what rate to charge them.
For example, let's imagine that you see a counselor for help getting through a divorce, and your therapist puts the diagnosis of "Adjustment Disorder with Anxiety" on the claim form so that the insurance company will pay for your sessions. After 8 sessions you're feeling on better emotional and mental ground, you say thank you and go on your way. A few years later, things change, you've decided to become self-employed, or maybe you get laid off from work, so you apply for individual health insurance. The insurance company checks with MIB, sees the diagnosis and then denies you or charges you higher rates.
Things happen in life that could create a need for private insurance. Here are some examples: lose dependent status on parent's health insurance, get a job that doesn't offer group health insurance, become self-employed, retire before age 65, come to the end of COBRA benefits. The reason that it can be easier for some people to get insurance coverage through employers who have a group plan is because the insurance companies look at the risk of all employees combined. This is not the case for the individual seeking insurance.
Many people choose to pay privately for counseling to limit the problems that the insurance companies can know about them. Insurance companies only have records when health care providers bill them for services. The information is on the claim form that's submitted. By choosing to pay privately, there is no information sent to the insurance company.
You can go to www.privacyrights.org for information on employer background checks, and check the internet for updated information about any possible difficulties of obtaining health insurance when moving from group to individual health insurance.