Life Insurance Qualifications May Hinder Mental Health Care

Several years ago, Djuna Osborne was receiving therapy for depression when she attempted to increase her and her husband’s life insurance policy. Since she had decided to bill her health insurance for her therapy sessions, there was a public record of her diagnosis.

As a psychotherapist herself, she knew disclosing her depression was a costly risk. However, instead of solely increasing her fee, the company denied Osborne life insurance for a year.

“I’m not sure if they were waiting for me to kill myself or not kill myself, but my mental health diagnosis was more outstanding than any physical health issue, even though I was completely stabilized with treatment, had not taken off any work, or had any leave of absence or filed for any type of disability,” says Osborne. “I was shocked and angry that there was such a stigma and a complete misunderstanding of the nuances of mental health diagnosis, treatment, and functioning.”

Osborne is far from the only person facing barriers or fear around obtaining life insurance due to mental health conditions. In a July 2020 report, researchers found that 56% of participants would like more clarity on how their mental health experience would affect their application. Another 86% said they did not know who to turn to for independent advice around declaring mental health conditions on insurance applications. 

Of those who applied for life insurance and were denied coverage, 68% said they believe they were unfairly discriminated against due to their mental health, and 52% said they would consider downplaying their mental illness if applying for insurance again. On top of that, 54% said they did not receive an explanation, and 52% said the decision’s rationale was unclear.

Life Insurance Uncertainty

The vague nature of life insurance qualifications can create added fear. Take Fidelity Life’s page entitled “Life insurance for people with depression and anxiety,” where the provider vaguely shares the impact mental health conditions can have on a person’s access to life insurance.

A statement reads, “If your depression or anxiety is mild and you’re under professional care, it may not impact your rates much. If it’s severe and you’ve been hospitalized or are at risk of suicide, it could raise your rates or prevent you from qualifying at all.” 

There is no clear line dividing what qualifies as “mild” or “severe.” Jason Drake discovered this after being denied an increase to his life insurance due to mild anxiety. This instance was Drake’s first time attempting to expand his existing plan. He came to a question while applying that asked if he was undergoing treatment for any psychiatric conditions.

As a licensed clinical social worker, Jason was well aware of the mild nature of his condition. He mentioned anxiety, assuming it would be considered low risk and not affect his insurance. Instead, he received a letter stating that he could not increase his life insurance due to treatment for anxiety.

“I struggled with anxiety, was not taking medication on a daily basis, and had a medication that I rarely took as the need came up,” explains Drake. “I could accept if they came back stating that the coverage could increase but at a slightly higher rate than an individual without anxiety. But, to deny increased coverage for such a mild, very low-risk diagnosis was confusing,” says Drake.  

While some people will have a life-long mental health condition, many others begin to show signs of one after a painful event. “It would be abnormal if one were to, say, lose a partner tragically in a car accident and not to experience a traumatic response and one that would likely produce symptoms that mirror depression or anxiety, or both. "If a human being didn’t respond that way, that would be cause for more concern,” says Charlayne Hayling-Williams, PhD, president and co-founder of Community Wellness Ventures.

Risks of Life Insurance Denials

Before a person can even be denied life insurance, the system has detrimental consequences, namely motivation to avoid mental health care.

“We’re giving people who are at high risk for suicide, for engaging in violent crime, or disengaging and isolating from society in general, such as children who may be experiencing abuse or neglect, another reason why they should not engage in treatment and speak up and have a shot at a productive and happy, healthy life—especially for Black and brown populations that are at greater risk,” says Hayling-Williams.

“Associating engagement with a therapist as just being ill or a risk factor for payers or insurers is not only a slippery slope but really faulty,” continues Hayling-Williams. “We want prevention. Talk therapy prevents hospitalization. It prevents a number of critical life events, such as suicide.”

Elizabeth Green, a lawyer and partner at Kantor & Kantor, focused on helping individuals obtain insurance benefits, agrees: “Insurance companies would actually save money by providing benefits for medically necessary treatment because it prevents further escalation and potential deterioration of mental health issues.”

There are clear financial consequences to life insurance denials. In the July 2020 study, 69% of people denied life insurance reported feeling concern over losing their job or home, or getting into financial difficulty. Also, 74% said they were worried about their family or loved ones not being financially secure.

Mental Health Providers Are Avoiding Insurance

Many mental and behavioral health professionals, such as Drake and Osborne, are avoiding insurance as a method for protecting their patients. “It was beginning to be unethical as my patients were not meeting the full criteria for a diagnosis and the only way to get reimbursed for care through insurance is to submit patient claims with a diagnosis that the insurance company deems acceptable,” says Osborne.

She stopped taking insurance in March 2020. “And, there is no mental health diagnosis on record anywhere that could potentially impact their ability to get future care or coverage,” she adds. 

John Umhau, MD, MPH, doesn’t accept private insurance either. He works with patients who have alcohol use disorder (AUD) and often prescribes naltrexone. Two of his patients taking naltrexone were denied insurance for taking the prescription—one for life insurance.

Umhau wrote a letter to the life insurance company explaining that the person was in remission, but they maintained the rejection. Now, he feels obligated to take even more precautions to protect the privacy of his patients and ensure they receive the help they need without ruining their chance at life insurance.

These steps include keeping no digital records, providing written prescriptions, and sending patients to independent pharmacies that will not electronically upload prescription and patient information. In practice, this system is only available for individuals who can afford to pay out of pocket for mental health care.

How Mental Health and Life Insurance Interact 

According to Green, part of the issue stems from insurance companies relying on their own physician review of a patient rather than speaking to their regular clinician.

These reviews fail to paint a complete picture of a person’s mental health journey and needs. “Either life insurance companies are aware of the nuances of mental health and are just taking advantage of it to deny coverage, or they aren’t aware and need to be updated with the reality of what mental health looks like and behaves like now,” says Osborne.

While Drake says he can agree on higher premiums for people with greater risks, he is against denying coverage altogether for any pre-existing condition.  

Steps to Take If Your Insurance Is Denied

It is possible to appeal a life insurance company's decision. “Patients can and should appeal denials in writing,” says Green. “The appeal should provide an explanation as to why the mental health treatment is medically necessary. We recommend including letters of support from the patient’s clinician or treating physician explaining why the treatment is medically necessary and providing treatment or medical records.” 

After completing an appeal, Green explains people can also submit to an independent medical review through state departments of insurance.