Rehab Insurance

The decision to go to drug rehab should ideally never be encumbered by financial circumstances. Rehab is priceless because it saves lives; however, rehab is seldom free.

As the Substance Abuse and Mental Health Services Administration (SAMHSA) notes, in 2013, the National Survey on Drug Use and Health found that 22.7 million Americans in the 12 or older age group were in need of treatment for an illegal drug or alcohol problem. However, fewer than three million people in that age group actually received treatment from a rehab program. Limited finances are likely to be one of the barriers to accessing rehab treatment. Part of the concern is that not all rehab centers even accept health insurance. According to SAMHSA, in 2011 only 56 percent of treatment facilities with a primary focus on the treatment of drug addiction accepted private insurance.

Health Insurance and Paying for Rehab

Health insurance coverage can come from different sources. In 2013, a state-to-state review of individual health care coverage in the US revealed the level of participation Americans have in different health care plans. A sample of the findings from five selected states is as follows:

  • Employer-sponsored plan: Arizona: 41 percent / California: 45 percent / New York: 48 percent /

Texas: 46 percent / Michigan: 53 percent

  • Other private insurance: Arizona: 5 percent / California: 7 percent / New York: 6 percent / Texas: 5 percent / Michigan: 5 percent
  • Medicaid: Arizona: 19 percent / California: 19 percent / New York: 21 percent / Texas: 15 percent / Michigan: 16 percent
  • Medicare: Arizona: 14 percent / California: 12 percent / New York: 15 percent / Texas: 12 percent / Michigan: 15 percent
  • Other public insurance: Arizona: N/A / California: 2 percent / New York: 1 percent / Texas: 2 percent / Michigan: 1 percent
  • Uninsured: Arizona: 19 percent / California: 15 percent / New York: 9 percent / Texas: 20 percent / Michigan: 11 percent

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The Affordable Care Act (ACA) was passed in March 2010, before the above coverage rates were collected. Still, at present, there may be more covered Americans than these rates reflect. According to the United States Department of Health and Human Services, since ACA was passed, 16.4 million Americans who were previously without coverage became insured. In addition to improving access to health insurance, ACA has made unique and wide-spanning strides for coverage of drug rehab services.

According to the White House, ACA considers substance use disorders to be one of the 10 elements of essential health care benefits. This designation means that Medicaid and all health insurance policies that are purchased on Health Insurance Exchanges will include coverage for (allowable) substance abuse treatment services. For individuals unfamiliar with the Health Insurance Exchange, it is a marketplace of insurance plans that are governed by the rules of ACA. It is important to note that private plans that are purchased outside of the Health Insurance Exchange may not be required to follow ACA rules.

The U.S. Department of Health and Human Services determines the specific type of drug rehab services that are covered under ACA. While it is not feasible to discuss the exact type of coverage under each of the many health insurance plans, speaking in broad strokes, ACA makes the following guarantees in the area of substance abuse treatment:

  • Expanded Medicaid coverage: Adults new to Medicaid who are low-income and childless can receive medical coverage, including substance abuse and mental health treatment, with all costs assumed by the federal government.
  • Parity of types of services covered: Medicaid plans are required to provide a level of coverage for substance use disorders and mental health disorders on par with the coverage of medical and surgical care.
  • No pre-existing exclusion: Insurance plans under ACA cannot exclude access of coverage to individuals with a pre-existing substance use disorder or mental health disorder.
  • Expansion of community health centers: Through 2015, under ACA, 700 community health centers are scheduled to be opened throughout the country, and many will provide substance abuse treatment services.
  • Increased funding: In 2014, $50 million was dedicated specifically for treatment support of people with substance use disorders.

The substance abuse treatment provisions of ACA make clear that the federal government recognizes the exceptional need many Americans have for rehab services. When an individual is ready to enter drug rehab, he or a loved one will want to inquire with the insurance provider directly (whether it’s a private insurance company or Medicaid). If a rehab facility has already been selected, a member of the staff may be able to learn more about the insurance plan’s coverage terms and then make the necessary rehab admissions arrangements. In the event that a person in need of rehab does not have health insurance, he may contact an insurance plan navigator on the Health Insurance Exchange and learn about affordable options. If the individual qualifies as low-income under the state’s Medicaid eligibility guidelines, he may apply to be approved for Medicaid.


One of the main benefits of having a plan from the Marketplace (i.e., purchased through the Health Insurance Exchange) is that certain individuals and families are eligible for a subsidy based on income level. But not everyone buys insurance from the marketplace or would even qualify for the subsidy. Many Americans purchase a health insurance plan outside the marketplace or have coverage through an employer. In this case, it is important to become familiar with the insurance policy’s Summary Plan Description.As the U.S. Department of Labor explains, a Summary Plan Description is a document that details the coverage terms of an insurance policy. Insurance companies rely on the provisions of the Summary Plan Description (and any other relevant plan documents) to either cover or deny a claim. Before entering drug rehab, it is essential to review the plan’s written coverage terms for substance use disorder treatment.

One Mother’s Struggle for Coverage

woman on phone discussing her bipolar disorder

Trudy Avery, a resident of Cape Cod, Massachusetts, faced a parental nightmare when, in 2005, her 18-year-old son faced an opioid addiction. At the time, the Avery family was covered by a major national insurance provider. The insurance plan specifically stated that it would cover 60 days of inpatient care for substance abuse per year. In 2005, the plan paid for a five-day detox but would not cover a 30-day program because it deemed that an abstinence maintenance program was not medically necessary. This determination directly contravenes the well-established addiction treatment principle that detox alone is not sufficient to treat addiction.

When Avery’s then 21-year-old son overdosed in 2008, the same plan covered a 14-day stay at a rehab center. After the 14-day stay, Avery’s son moved to an outpatient treatment program. The insurance denied the outpatient center’s $23,000 claim, leaving the Avery family to pay this bill despite their belief that insurance would cover up to 60 days of treatment.

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Avery would not back down from her claim for reimbursement. Avery had a reasonable expectation, based on a contractual term, and she wanted the insurance company to be held to its written promise to provide up to 60 days of coverage. When the insurance company denied Avery’s appeal, she reached out to the Massachusetts Attorney General for assistance. Avery also shared her story with the state’s former OxyContin and Heroin Commission. Ultimately, in 2009, Avery testified before the statehouse. Subsequently, a state senator and (then) chairman of the Heroin Commission called a personal meeting between Avery and the insurance company. Avery was reimbursed for her son’s outpatient stay.

When Avery’s son relapsed again in 2012, Congress had already passed the Mental Health Parity and Addiction Equity Act. Avery’s son, still on the same family health insurance plan, was no longer subject to a 60-day limitation because of provisions in the Act. However, the insurance company would only approve Avery’s son’s rehab stay in weekly increments and ultimately capped coverage at approximately 30 days. Again, the insurance company said additional rehab services were not medically necessary.

In Massachusetts, an insurance company is the ultimate judge of whether a rehab service (or any medical service) is medically necessary, even if the attending physician says the treatment is medically necessary. In 2009, the Pennsylvania Supreme Court decided that a managed care plan could not refuse to cover a service if a doctor finds the treatment to be medically necessary. The court’s decision wrested the power away from insurance companies operated in Pennsylvania and posited it in the hands of the medical personnel. Now that this precedent has been set in Pennsylvania, more states may follow suit.

Avery’s story reveals some of the challenges that one may face when working through insurance for coverage for rehab treatment. However, some insured individuals may have a far more seamless claims processing experience. The Avery example is intended to provide some insight into the ways an individual will need to be vigilant in the process of using insurance to pay for drug rehab treatment. It is also important to bear in mind that while Avery was frustrated about the insurance coverage process, she never regretted her efforts because rehab repeatedly saved her son’s life.

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