The Hidden Financial Cost of a Mental Health Diagnosis

Photo by Scott Graham on Unsplash

I’m studying for a license to sell life insurance for my new job. Ironically, I can’t get life insurance.

To a certain extent, accepting a diagnosis of mental illness from a doctor is a choice. So is following any treatment plan. We must carefully consider why people so readily accept such diagnoses and just as thoughtlessly abandoned the treatment plans prescribed to make them better. All without considering the broad implications of both decisions.

One of the greatest implications of a diagnosis of mental illness and the beginning of treatment, one almost never considered by the doctor and the patient, is the financial one. The label mentally ill, when communicated to the finance industry, can be ruinous.

There has been a huge increase in the number of people diagnosed with bipolar disorder. According to the NIH there is a global occurrence of bipolar disorder of 0.53%, whereas in the United States the annual rate of bipolar disorder in 2024 is 2.8% with a lifetime occurrence of 4.4%. From 1970 to 2000 these numbers in the US held fixed at 0.4% to 1.6%

So what happened? How have the numbers increased so much? And why in the US and not the rest of the world? As my father long taught me, follow the money.

Anyone who reads me closely will fall asleep. Yet those who strain through tired eyes and stick with it will soon learn that I believe far too many people blame a difficulty to overcome challenging life events on mental illness, when simple things like taking responsibility for one’s actions and hard work are what are really needed, and too many people take medication and go into therapy for problems that should be approached with fortitude and a stiff upper lip, and yes, faith. Sure, bipolar disorder is real, I mean, I have it, and I know others that truly struggle through life crippled by mental illness. It is real, but not for 275% more people than had it in 2000.

Bipolar disorder makes life difficult in unexpected ways. Before you say yes to a diagnosis and fill that first prescription, or, worse yet, do it on behalf of your child, consider what it does to life insurance.

Life insurance is a necessary part of any financial life, especially when one has a family to consider, costs the family may not be able to cover if they die, and generational wealth to pass on. But life insurance is cold and amoral. An underwriter considers the risk of an applicant to decide if that person is insurable for a reasonable rate and a reasonable rate of return. To do so they look carefully at a person’s medical records. Many things in those records will either make the cost of insurance too high, or make the applicant uninsurable.

Medical conditions that make an applicant too risky make the underwriter reject the application. Bipolar disorder is one of those conditions. So applicants for life insurance with bipolar disorder just can’t get coverage.

But it gets worse. A life insurance company reports your medical records and the reason they rejected you to something call the Medical Information Bureau (MIB). HIPAA doesn’t help you. You sign away those rights on the insurance application. Information on you in the MIB is available to other insurance and finance companies. Ostensibly, insurance companies consult the MIB to prevent fraud from applicants, but there your information, your diagnosis, and all the meds you take sit for years for any underwriter to see. Sure, it makes applying for your second or third time easier. Easier to get rejected.

It's not just life insurance. Health insurance, disability insurers, and long-term care policy writers all have access to the MIB. I’ve been rejected. I’m in there. I’m 61 and starting to encounter the cognitive effects of a life with bipolar disorder and the treatments for it, and I can’t get long-term care insurance to protect my wife’s and daughter’s assets.

There’s more. While taking an application an agent writes something called an agent’s report. This document subjectively sums up you and your lifestyle. It’s a testimony of how your lifestyle may impact your condition and your insurability. So if you’re dressed a little sloppily, or there’s a bottle of cognac on the sideboard, or a dirty ashtray on the coffee table, or even the wrong kind of dog barking at the door, all that, and the agent’s opinions about them, go in the report.

Your file with the MIB can be requested and contested. The agent’s report remains confidential. You never even know it exists.

Now people will hear all this and protest that it’s wrong. All the insurance companies care about is profit. Well, you know who else cares about profit? Psychiatrists, drug companies, and therapists! A consideration of the business models reveals that the insurance companies do make money. A lot of money. But for centuries they’ve been transparent about their business, protected countless families, and paid out billions in claims. The mental illness industry, on the other hand, has more customers than ever, more conditions to treat, more money rolling in, more drugs to prescribe, and more impact on people’s lives, and the results are dismal. Suicide rates, substance abuse, and disability claims are soaring. Who’s the better business? Who treats their customers more fairly? Who does better for all society?

Before you condemn me for siding with the insurance companies consider our children. The children we set up for early financial failure by dragging them in for diagnoses and drugs for problems we used to tolerate as the cost of youth, and mostly grow out of. Back when the rate of bipolar disorder topped out at 1.6% it was widely accepted that serious mood disorders emerged post-adolescence into one’s early 20s. For decades that was the science. But an untapped market was being ignored and in the last decade, suddenly, kids as young as 6 and 7 are being diagnosed with affective disorders and medicated and pushed into therapy. And just like that the number of people treated for bipolar disorder, and the profits earned by treating them, have skyrocketed. And the financial security of so many has been put at risk.

Of course mental illness is real. Some people suffer terribly. Some people need meds to get by. I’m one. But in the final irony all this money making in psychiatry has pulled money away from those with serious mental illness and less ability to pay, and has diverted the research, marketing, and treatment dollars to the worried well – those with good insurance which can pay hefty bills. It’s comic that, in the long run, the very customers that profit psychiatry now will be less able to get insurance and pay those bills later.

PS: There’s a work around to all this. Get a job with good benefits. This can take care of health and disability insurance, and likely make group term life insurance available. Group policies, like the ones you get from your employer, rate an organization, not the individuals that make it up. So you get coverage just for being part of the group. No individual rating required. And if your employment ends you can often convert that group term life coverage into a permanent policy with no medical check.