Preventing mental health insurance claim denials

For clinicians in private practice, mental health insurance claim denials can significantly impact your revenue and practice sustainability.

The good news? Most mental health insurance claim denials are preventable.

This article explores health insurance claim denial reasons and how to successfully appeal an insurance denial.

Health insurance claim denial reasons

Here are some common types of payment issues and mental health insurance claim denials that therapists face:

The claim is being held, or “pending”

In some of these cases, the claim is awaiting Coordination of Benefits. This is when insurance plans are waiting for the client to provide information about other possible insurance coverage they may have.

The claim could also be awaiting your progress notes.

In this case, the plan has requested your session notes before they will process the claim.

Mental health insurance claim denials due to your errors

It’s possible the claim was incomplete or illegible.

Or, perhaps you provided an out-of-date ICD-10 diagnosis code, or one that is not covered by the insurance for mental health plans.

Remember, just because there is a diagnosis code for a condition, doesn’t mean the health plan will cover it.

There may have been a CPT code, modifier, or place of service issue. Perhaps you neglected to put one of these codes, billed for a type of service the plan doesn’t cover, or used an old code.

It may be a duplicate claim if, perhaps, you previously billed for this session.

Another possibility is that the claim may have arrived late. Most insurance plans require network providers to submit claims no more than 60 or 90 days after the date of service. (Here’s how to get reimbursed for late claims.)

You could have sent the claim to the wrong address, or even to the wrong health plan.

If you’re billing a secondary insurance plan, you may be missing the primary plan’s Explanation of Benefits that describes what they paid.

Mental health insurance claim denials due to insurance coverage issues  

Perhaps you are not a network provider, and the plan doesn’t reimburse for out-of-network providers. This would occur with HMO or EPO plans.

Telehealth sessions may be denied in cases where this is not a covered benefit for the client.

Or, perhaps the client’s specific insurance for mental health only covers telehealth with in-network providers, and you are out of network.

If you are not fully licensed, and the health plan only covers licensed providers, the claim would be denied. This could also happen if your license is not covered by the client’s health plan.

Another reason for a denial may be because your client was no longer (or not yet) covered by the health plan at the time of service.

SimplePractice offers tools that will automatically check your client’s eligibility and allow you to review ahead of your appointment so you have peace of mind that clients are covered when filing insurance claims.

Clinical denials

After a clinical review or reviewing your notes, an insurance plan may feel you did not adequately document or defend the “medical necessity” (or need) for treatment, the appropriate level of care, treatment frequency, or treatment duration.

Essential strategies to prevent insurance for mental health claim denials

1. If you encounter a claim denial, try calling the health plan

The insurance  plan can often clarify the problem with a simple phone call, or give guidance on the best way to fix it.

Ask if you can fax a corrected claim to expedite your payment.

2. Learn from previous denials

Understanding the specific reasons why insurance for mental health claims are denied is crucial for prevention.

Create a system to track and categorize all denial data.

Document denial codes, payer responses, and resolution paths to identify patterns.

3. Be specific in your coding

Therapists should ensure they use the proper CPT codes, modifiers, and Place of Service Codes for the type of service provided.

Diagnoses should be coded with the highest specificity possible.

Use specific F codes from the ICD-10 and, when possible, avoid Unspecified diagnoses, which are overutilized.

You can look it up in the SimplePractice ICD code library . Remember that some sexual disorders may not be covered, and something more than a Z code may be required as a primary diagnosis.

4. Verify insurance eligibility before sessions

Perhaps the single most effective tool for preventing denials is verifying a client’s health insurance coverage before the first therapy session.

Now SimplePractice offers tools that will automatically check your client’s eligibility and allow you to review ahead of your appointment so you have peace of mind that clients are covered when filing insurance claims.

After an insurance status check is run, SimplePractice will show whether the plan is active, inactive, or if you should review the information.

This practice eliminates many potential denials before they occur, and gives you the opportunity to:

• Confirm that their coverage is active
• Confirm the claim address (don’t trust the client’s card)
• Verify mental health benefits specifically (as they often differ from medical benefits)
• Identify telehealth coverage, if applicable
• Identify any session limitations
• Determine authorization requirements
• Calculate client financial responsibility

Since therapy appointments are typically scheduled in advance, insurance verification can be completed before the first session without creating additional wait time for clients.

Don’t assume that different clients with the same health plan have the same claims address or that a client’s coverage hasn’t changed from one year to the next.

5. Document the medical necessity of your sessions

Since insurance plans typically do not cover counseling that is just aimed at personal growth, your session notes should clearly document the diagnosis and need for treatment.

This includes:

• Symptoms and impairment addressed
• Interventions used
• Client response
• Treatment plan progress

6. Obtain proper authorizations

While most mental health insurance plans no longer require preauthorization for routine mental health services, some plans do require this before the first session. Other plans require it after a certain number of sessions, and Employee Assistance Programs (EAPs) will require this.

For these plans, obtaining authorization doesn’t guarantee payment, but failing to get required authorizations almost certainly guarantees denial.

Remember that authorizations typically come with expiration dates and limits on the number of authorized sessions.

Track these carefully, as sessions that exceed authorized limits are frequently denied.

7. Use the proper claim form, and fill it out carefully

While some EAPs may require their own claim form, most insurance plans typically require the CMS-1500 health insurance claim form for mental health services.

Ensure your team understands how to properly complete all form fields.

Don’t guess on how to fill out any box on the claim form.

Errors in any of these fields can trigger automatic denials in your mental health billing.

8. Submit claims promptly

Late claim submission is a common reason for mental health insurance claim denials.

Most payers have strict timely filing deadlines, averaging 90 days, depending on the payer.

(Here’s more about getting paid for late claims.)

Out-of-network superbills may typically be submitted within at least one year.

When billing a secondary health plan, be sure to attach the Explanation of Benefits from the primary plan.

Implement systems to ensure that all claims have been paid within a reasonable time period after sessions.

It is easy to overlook an unpaid (or unsubmitted) claim, and by the time you submit (or resubmit), it may be too late.

Even a growing practice shouldn’t allow backlogs to develop, as delayed claims can quickly become denied claims.

9. Respond promptly if the health plan asks for more information

If the claim is being held or “pending,” awaiting Coordination of Benefits or your session notes, be sure you or your client respond promptly with the necessary information.

If you don’t comply, the sessions will not be reimbursed.

10. Mental health appeal letters—here’s how to successfully appeal an insurance denial

If a claim is denied, you can always appeal the denial.

An appeal (also known as a dispute) is a formal letter you would write to the health plan, disputing the way a claim was paid, or asking them to make an exception to their payment policies due to a special circumstance.

The plan usually will not allow you to bill the client for a claim that is denied due to your error or late submission.

However, you can always try to appeal the denial, and ask them to make an exception, especially if you have a good reason for the error or the claim was late (for example, if you were in the hospital or your office burned down, making you unable to file it on time)

You can often appeal a plan’s determination that the sessions you provided were not medically necessary.

This may require a written appeal. In the appeal, you would need to defend why you feel the sessions were needed to address the client’s diagnosis, at that frequency, and for that length of time.

Each health plan has a different appeal process.

While the claim denial may include the appeal address, it is wise to call the health plan to ask where to send your mental health appeal letter and what to include in your letter. (For more on appeals, see our upcoming article on this topic.)

11. Partner with mental health billing experts

Staying on top of insurance for mental health billing processes can be a full-time job that requires continuous education.

Many practices handle insurance billing on their own early in their practice’s lifecycle.

However, as your practice grows, it can be more important to spend more time on client care and other aspects of your business, and less time on managing insurance billing.

That’s why SimplePractice offers a managed billing service for in-network insurance billing.

Working with billing specialists and revenue cycle management (RCM) specialists who understand the nuances of mental health billing can dramatically reduce denials.

SimplePractice managed billing experts can:

• Identify denial patterns specific to mental health claims
• Implement preventive measures
• Handle appeals efficiently
• Train your staff on proper documentation
• Keep you updated on changing payer requirements

How a revenue cycle management partner can help your mental health practice

Experienced RCM partners, like the specialists in SimplePractice managed billing, bring specialized knowledge of insurance for mental health billing requirements across different payers.

They combine advanced technology with human expertise to:

• Ensure clean claim submission that minimizes denials
• Follow up on every claim until payment is received
• Appeal denials with supporting documentation
• Optimize your revenue cycle from scheduling to payment

By partnering with experts who understand the unique challenges of mental health billing, you can significantly reduce claim denials, increase cash flow, and return your focus to providing excellent care to your clients.

Next steps for your practice

If you’re following the guidance in this article and your practice is still experiencing a high rate of mental health insurance claim denials in your billing, it might make sense to consider a service like SimplePractice managed billing.

With the right systems in place, you can minimize mental health insurance claim denials and maximize reimbursement—allowing you to focus on what matters most: helping your clients thrive.

How SimplePractice streamlines running your practice 

SimplePractice is HIPAA-compliant practice management software with booking, billing, and everything you need built into the platform.

If you’ve been considering switching to an EHR system, SimplePractice empowers you to run a fully paperless practice—so you get more time for the things that matter most to you.

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