Why I Don't Take Insurance by Steve K.D. Eichel, PhD 

There are several reasons I don't take health insurance. The primary reason has to do with the nature of my practice. I work with people who typically have highly sensitive material they want to work on.  

It is a little-discussed fact that when you sign up for health insurance that covers psychotherapy, there typically is a phrase tucked away in your contract somewhere that allows your insurance company to "inspect" your therapist's files. (Note: HIPAA does not address this problem. Mostly, HIPAA addresses the issue of what records can be electronically transmitted to and shared with other health professionals or healthcare institutions.)  

The bottom line: If your health insurance carrier wants to see your therapist's notes about you, they usually can. 

Prior to the 1990s, insurance companies rarely if ever demanded access to a therapist's files. With the advent of managed care (or, as some people derisively call it, "mangled care"), however, that situation changed. In almost all cases, your therapist must discuss your therapy with a "case manager" in order to certify ongoing sessions. This typically happens anywhere from every 4 to 10 sessions. And I know several therapists who have had their records "inspected."  

What really upset me was when I once visited the corporate headquarters of a large managed behavioral care company in Pennsylvania. I personally witnessed a few case managers sharing "interesting" file information with other managers...and chuckling over it. (This is totally inappropriate behavior and can be cause for a case manager's termination, and I want to emphasize that I believe the vast majority of case managers don't do this...but some apparently do.)  

In addition, there are certain situations when people do not want others to know they have had psychotherapy. For example: certain sensitive government positions, the military, certain professional schools, and life insurance underwriters...these and others will demand and gain access to your medical records. When you give permission to access your medical records, and you used insurance to cover psychotherapy, the dates and length of your therapy, and very possibly your diagnosis, will be revealed.

I wish we lived in a world in which psychological concerns and psychotherapy were completely destigmatized. Perhaps one day we will. But we are not there yet.
 

The nature of my practice has slowly but surely shifted from working with more "typical" issues (like depression and anxiety) to also working with increasingly sensitive issues (like sexuality, significant trauma and substance abuse). It became steadily important to me to be able to offer as close to a 100% guarantee of privacy and confidentiality as humanly possible.
I find this whole situation intolerable, and in 1994-95 I proceeded to terminate my contracts with every insurance company with which I was paneled.

From a 1993 New York Times article:

The most common invasion of the privacy of the therapy session is one that patients often fail to realize they have given permission for: the scrutiny of their psychotherapy by employees of the health plan paying for treatment.

"When you sign up for a health plan or health insurance policy, you usually sign a release giving the company the right to know details like your diagnosis, what kind of therapy you are receiving and the number of sessions," said Dr. [David] Nevin.
Goleman, Daniel. (1993, April 14). What you reveal to a psychotherapist may go further. New York Times, retrieved from http://www.nytimes.com/1993/04/14/health/what-you-reveal-to-a-psychotherapist-may-go-further.html