Psychedelics Bump Up Against the Iffy World of Healthcare Insurance

Healthcare insurance for psychedelics is being explored with more vigor today as patients begin to realize the enormous costs involved in such therapy. 

Expensive Treatments

For example, patients accessing legal MDMA therapy require two licensed therapists, about 20 psychotherapy sessions and possible overnight hospital stays. The total treatment costs range from $12,000-$20,000. 

Psilocybin retreats often come in at $5,500 or more per person, with many located in Amsterdam or Jamaica that don’t include round-trip airfare.

There are a handful of insurance companies jumping into the market, always with the caveat that the limited coverage they can provide is very risky and therefore very expensive.

Progress may be closer at hand.

In November, Novamind Inc. (CSE:NM)(OTCQB:NVMDF) announced that it got approval for direct billing of intravenous (IV) ketamine for treatment-resistant depression (TRD) from four major health insurance providers: Blue Cross Blue Shield, the University of Utah, PEHP Health & Benefits and MBA Benefit Administrators. “This initial success with insurance coverage of ketamine is promising for the future of psychiatry because it sends a strong signal that payors are interested in more effective treatments for mental health conditions as supporting research emerges,” Novamind Chief Medical Director Dr. Reid Robison wrote in a tweet

Novamind also opened a dedicated call center specialized in insurance benefits verification and prior authorizations.

Insurance Obstacles

While the good news about insurance coverage for psychedelics therapy picks up, here are five obstacles that are likely to confound its emergence:

  1. The FDA block. Today, some insurers may provide a drug-specific policy, usually for drugs that are approved for use by the FDA. The psychedelic ketamine can be covered by healthcare insurance. But the FDA will not cover any psychedelic drugs that aren’t FDA approved.. which, in the psychedelics world, is pretty much everything else for right now.
  2. Coverage conundrum. Adequate provider reimbursement needs to include all psychedelic-assisted therapy components, including assessment, therapeutic preparation, dosing/medication session (compound, therapy, and/or supervised observation), and integration therapy. That’s going to take the health insurer time to identify, understand and negotiate. Maybe a lot of time.
  3. The DEA in the way. The current alternatives for access for psychedelic compounds listed as Schedule 1 are various forms of unregulated psychedelic treatments, which typically come at a cost premium and carry legal and participation risks. All that could change if/when the DEA decides to change the scheduling of various psychedelics, such as LSD, MDMA and peyote, and get out of the way of the industry’s business development.
  4. Definition distinction. What exactly is psychedelics therapy? Is psychedelics treatment medical treatment, or mental health treatment? That’s something that Oregon is wrestling with. And it’s a key distinction for getting health insurance. Starting in 2023, Oregon will be the first state with widely legalized psychedelics. Technically, the state didn’t approve psychedelic therapy, though the program is often interpreted as such. Ballot Measure 109, which passed in November 2020, gave the Oregon Health Authority (OHA) the job of overseeing magic mushroom consumption at “service centers,” in the presence of “licensed facilitators.” As the state gains a more full understanding of the consequences of its legalized psychedelics market, there is a movement underway to perhaps create a new model of health insurance specifically for psychedelics. But it still has do something—clinical trials?—to make the distinction between medical health and mental health clear to an insurer. And that’s one tricky wicket.
  5. Mental health miscues. Psychedelics treatment today for most researchers is considered mental health treatment. That’s how it is understood in clinical trials, and some doctors are risking trying it as treatment for their patients. But there are still questions about exactly how it works in the human mind, and if it could work for the minds of a broader community. On top of that, insurance for mental health is getting worse. The 2008 Mental Health Parity and Addiction Equity Act, Affordable Care Act, and state mental health parity laws require certain health care plans to provide mental and physical health benefits equally. But insurers are still not covering mental health care the way they should, according to the National Alliance on Mental Health, claiming inadequate provider networks and unreasonable criteria to qualify for coverage. Imagine the coverage/no coverage gyrations that mental health care insurers would have to go through if psychedelics therapy is added?

Dave Hodes

David Hodes is a business journalist based in the Washington D.C. metropolitan area. He has contributed feature articles to several cannabis and psychedelics publications, as well as general business/lifestyle publications, on a variety of topics. Hodes was selected as 2018 Journalist of the Year by Americans for Safe Access. He is a member of the National Press Club, and the deputy booking agent for the National Press Club Headliners Committee.


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