Return to all articles

Demystifying Insurance: How Mental Health Benefits Work

A peek over dark green garden hedges that, together, form a mystifying maze.

When looking for a therapist, you’ll probably find a good many who don’t accept insurance. But many health plans cover therapy. In fact, if you have health insurance, you can probably use it to find an affordable therapist — or even, free therapy.

To figure out what your insurance covers, it helps to have a cursory understanding of what health insurance is, and how it works.

Types of Plans & Benefits

What is a HMO plan?

HMOs are a type of medical insurance that focuses on giving you access to comprehensive health services through a network of approved providers.

Generally, HMOs have lower (or no) deductible, and a fixed co-pay (e.g. $20 per visit). But, even though HMOs are often more cost-effective, they come with limitations that might not work for everybody.

If you have an HMO, you’ll just want to check what is (and isn’t) covered under your plan. If behavioral health care is covered, you might pay your therapist a low, fixed amount for each session.

HMOs typically only cover services that you have been referred to by a primary care physician, and even then, those services have to be done by a provider who is in-network with your insurance plan.

What is a PPO plan?

A PPO is a type of insurance plan that gives you more flexible access to a network of preferred providers.

Unlike HMOs, you can seek care without being referred by a primary care physician. You can also seek care from out-of-network providers, though you’d likely be responsible for more of the cost.

This added flexibility comes with more up-front cost in the form of a deductible, which most PPO plans include. After you meet your deductible, you may also be responsible for co-insurance, such as 20% of the cost of each session. This is a variable rate, unlike the fixed co-pays you see with HMOs.

So, if you have a PPO, you will likely need to pay out of pocket for your therapy sessions until your deductible is met. To budget for these sessions, you might want to find out how close you are to meeting your deductible, and how much each therapy session will cost.

When your plan comes with a high deductible, you might see it referred to as a High Deductible Health Plan (HDHP).

What is an HSA?

A Health Savings Account (HSA) is a type of savings account that allows you to set aside income, without having to pay taxes on it, for the purpose of covering medical expenses.

You can get an HSA from a number of banks, insurance companies, online organizations, and even your employer.

The greatest benefit of an HSA is that you’re not getting taxed on money that would go to medical bills. There are some strict rules about how that money is used, though, and who can open an HSA. For example; you can only open an HSA if you are enrolled in a high-deductible health plan, like a PPO.

If you plan to see your therapist regularly, you can set aside the amount that you expect to pay for co-insurance with an HSA.

What is an FSA?

A Flexible Spending Account (FSA) is similar to an HSA, in that it allows you to set aside tax-free income to be used on medical expenses, reducing your overall taxable income.

If you predict you’ll need funds to cover regular therapy or medical bills, an FSA is a great strategy for saving a few tax dollars along the way.

As with an HSA, an FSA can be used to set aside funds for your therapy co-pays without getting taxed on that income.

An FSA differs from an HSA in that you aren’t required to be on a high-deductible health plan. Another key difference is that the funds you put in your FSA do not rollover, unlike in an HSA. Any money you don’t spend, you lose.

Employee Assistance Programs (EAPs)

An Employee Assistance Program (EAP) is different from your health insurance plan. If you have an EAP, it was probably offered by your employer, who is probably paying for all the benefits included.

Those benefits can range from short-term counseling services, to referrals when crisis strikes, and more.

While an EAP isn’t designed to support long-term care, it is an invaluable resource to remember for rough patches. It’s also a great place to start if you’re still figuring out if therapy is right for you, and what you’re looking for in therapy.

Medicare & Medicaid Explained

Medicare and Medicaid function similarly to your average insurance plans, but with some important and dramatic differences.

Both are government-sponsored health plans, meaning Uncle Sam is footing a majority of the bill. If you don’t have medicare or Medicaid, you’re likely on a “private” health plan covered by private companies.

Medicare and Medicaid are designed to support very specific populations with very specific needs. To qualify for medicare, you will need to be age 65 or older, or in some cases, to have a disability. Medicaid acts as insurance for those who cannot access private insurance; namely low-income families, pregnant people, the elderly, and those with disabilities.

Medicare and Medicaid have lower costs, and there is no denial of coverage for pre-existing conditions. However, the network of providers who accept Medicare and Medicaid tend to be much smaller, and thus much more limited.

What will I pay?


A deductible is how much you are responsible for paying before insurance kicks in. Insurance plans vary in how much your deductible is, and some don’t have a deductible at all. If you do have one, though, you’ll need to pay out of pocket until that deductible is met.

For example, if your therapist charges $125 a session, and you have a deductible of $500, it would take four sessions — or, about a month — of paying the full rate out of pocket before your insurance company starts pitching in.

Your deductible is connected to your insurance plan, not your provider. That’s good news, because all your medical bills can contribute toward you hitting your deductible earlier. The downside is that, because your provider isn’t tracking all your medical appointments and bills, there’s a little more room for error when estimating cost.


Depending on your health insurance plan, you may be responsible for “co-payment.” This is particularly common on HMO plans, where you might have a fixed amount — like $25 — to pay for each therapy session.

If you have a co-pay, it’s a flat amount that you will always have to pay, typically up-front. It won’t contribute to your deductible, if you have one.


Co-insurance is often confused for a co-pay, but is markedly different. While a co-pay is a fixed amount, co-insurance is a percentage of the medical costs that you are responsible for paying.

Co-insurance is common on plans with deductibles, especially PPO plans. Typically, once you’ve met your deductible by paying out-of-pocket, you’ll only be responsible for co-insurance.

For example, if your co-insurance is 10%, and your therapist charges $150 a session, you’d be responsible for paying $15 per visit after you’ve met your deductible.

Co-insurance can sometimes mean that your payment responsibility will change when your insurance company processes your claim. To continue with our previous example, your insurance network might find that, according to their contract with your provider, the provider can’t charge more than $120 per session. That would mean the insurance company would owe you $3 for each session that was billed at the wrong rate.

Sliding scale

Therapists become therapists to help people, not to become rich.

Many therapists use “sliding scale” rates, where they offer reduced rates for those on a lower income. The idea is to make sure that their services are accessible to as many people as possible, while still being able to get food on the table.

Sliding scale rates aren’t set by insurance companies, and they are at the discretion of the provider offering it.

Those providers will commonly request proof of income, such as a pay stub or tax statement, to confirm they are billing you at an appropriate rate. Some only offer a limited number of sliding scale spots, to make their work financially sustainable.

If you’re looking for low-cost therapy, or free therapy, you might want to consider searching for clinicians that offer sliding scale. You can schedule free 15-minute consultations to learn if you’d qualify for a discounted rate.

How Therapy Bills Work

Therapy happens between you and your provider. Insurance companies aren’t going to get involved in your treatment. But, importantly, insurers play a big part in paying the bill.

Estimating the Cost of Therapy

Therapy is, indeed, health care. (“Behavioral health care,” in fact!)

And, as with all forms of health care, you should be able to make informed decisions about the services you pursue. That includes knowing how much therapy will cost.

When you’re paying with insurance, there are a number of factors that can influence how much you’re responsible for, and what insurance will cover. To estimate how much you’ll pay for therapy, it helps to know:

  • what is covered by your insurance
  • if you have a deductible, and how close you are to meeting it
  • if you’re responsible for co-payment or co-insurance
  • your therapist’s rates

If you are paying out of pocket for therapy without using insurance, your therapist is the one who will set the rate for each session.

If you are using insurance, you can ask your provider to help you estimate cost based on the rates your insurance company sets. You can also follow this guide to understand what, if anything, is covered by your insurance company.

How Insurance Claims Work

Most insurance claims will follow a predictable process, and knowing that process can empower you to more easily understand billing and coverage.

  1. Your provider estimates the cost of a service beforehand by checking your insurance coverage.
  2. At the time of service, your provider may charge you a co-pay and/or deductible based on that estimate.
  3. After, the provider submits a claim to your insurance company, detailing the services they performed and how much you paid.
  4. Your insurance company processes the claim, double-checking what is (and isn’t) covered.
  5. The insurance company shares an Explanation of Benefits (EOB), and any remaining balance is paid.

Your insurance company will pay your provider directly for whatever is covered.

They may also send you a refund in the event that you were overcharged by the provider.

Unfortunately, insurance companies sometimes discover you are responsible for more than what you paid up-front. If that happens, your provider will typically send you a bill to settle the remaining balance of what isn’t covered by insurance.

How Adjustments Work

When your insurance company processes a claim, they are double checking the bill your provider created against many factors that might change what you owe.

Sometimes, in that process, the insurer will notice something on your claim that needs to be updated or corrected. These are called “adjustments.”

An adjustment is fairly commonplace, and can look like…

  • A contract adjustment, when your insurance network has negotiated a lower rate in their contract with your provider.
  • A coding adjustment, when the codes your provider included on the claim don’t match the services they listed, or aren’t deemed medically necessary.
  • A coordination of benefits adjustment, when your insurer finds you have supplemental insurance, to split up coverage with your other health plans.

An adjustment isn’t usually a big deal, but it can make a big difference in your final bill.

Find out how much you’ll pay with Alma.

The health care system can feel intimidating, complex, and confusing. But, you don’t have to be an expert in insurance policies to find affordable therapy. By investigating your benefits, you can unlock the door to low- or no-cost therapy. And, by understanding how your insurance plan works, you can protect yourself from unexpected bills.

Get stories and resources like this in your inbox.

A headshot of Kevin Doherty, content marketer at Alma.
Kevin Doherty

About the Author

Kevin Doherty is a marketer and storyteller at Alma, an online platform that aims to simplify access to high-quality, equitable, and affordable mental health care. An alumnus of UCLA’s School of Theater, Film, and Television, Kevin specializes in bringing powerful entertainment principles into everyday, real-life communication.

More blog posts

A man works at his coffee table to calculate the cost of therapy after finishing a virtual consultation.
A cognac-colored leather couch, bathed in sunlight shining through the window of a trauma therapist's office.
Sitting on a green, grassy lawn under a blue sky, a redhead enjoys an ice cream bar.