Does Insurance Cover Rehab?

Published: February 2026 | Last Updated: February 2026 | Reading Time: 8 min

Federal Law Requires Coverage

Mental Health Parity and Addiction Equity Act (MHPAEA)

The MHPAEA, passed in 2008 and strengthened by the ACA in 2010, requires health insurance plans that offer mental health and substance use disorder benefits to provide them at the same level as medical and surgical benefits. This means your plan cannot impose higher copays for rehab than for comparable medical treatment, set lower day limits for addiction treatment than for medical conditions, require pre-authorization for addiction treatment if it does not require it for medical treatment, or apply more restrictive criteria for addiction care than for medical care.

Affordable Care Act (ACA) Protections

The ACA designates mental health and substance use disorder services as one of 10 essential health benefits. All marketplace plans, Medicaid expansion plans, and most employer-sponsored plans must include addiction treatment coverage.

What Insurance Typically Covers

Covered Services

• Medical detoxification — supervised withdrawal management
• Residential/inpatient treatment — 24-hour care (typically requires pre-authorization)
• Partial hospitalization (PHP) — intensive daytime programming
• Intensive outpatient programs (IOP) — structured therapy multiple days per week
• Standard outpatient therapy — individual and group counseling
• Medication-assisted treatment (MAT) — buprenorphine, naltrexone, methadone
• Psychiatric evaluation and medication management — for co-occurring conditions
• Lab work and drug testing — as part of treatment

Common Limitations

While parity law requires equal coverage, most plans still have cost-sharing structures. Your specific coverage depends on your deductible (amount you pay before insurance kicks in), copay (fixed amount per visit or service), coinsurance (percentage you pay after deductible), out-of-pocket maximum (annual cap on your expenses), and network status (in-network vs. out-of-network providers).

Coverage by Insurance Type

Employer-Sponsored Insurance

Most employer-sponsored plans provide robust addiction treatment coverage under parity requirements. Group plans often offer better benefits and lower out-of-pocket costs than individual plans.

ACA Marketplace Plans

All marketplace plans cover substance use disorder treatment as an essential health benefit. Coverage levels vary by plan tier (Bronze, Silver, Gold, Platinum) — higher-tier plans have higher premiums but lower out-of-pocket costs.

Medicaid

Medicaid covers addiction treatment for eligible low-income individuals. New Jersey expanded Medicaid under the ACA, covering adults earning up to 138% of the federal poverty level. NJ FamilyCare (the state's Medicaid program) covers detox, residential, outpatient, and MAT services.

Medicare

Medicare covers addiction treatment for eligible individuals. Part A covers inpatient treatment, Part B covers outpatient services and some medications, and Part D covers prescription medications including MAT.

How to Verify Your Coverage

Step 1: Contact Your Insurance

Call the member services number on your insurance card and ask about substance use disorder treatment benefits, covered levels of care, in-network providers, pre-authorization requirements, and estimated out-of-pocket costs.

Step 2: Facility Insurance Verification

Most treatment facilities offer free insurance verification as part of their admissions process. The facility's admissions team contacts your insurance company, verifies your specific benefits, explains your coverage in plain terms, and helps you understand expected costs.

Step 3: Pre-Authorization

For residential and inpatient treatment, most insurance plans require pre-authorization — advance approval before services begin. Treatment facilities typically handle this process on your behalf.

What to Do If Insurance Denies Coverage

Internal Appeal

If your insurance denies coverage, you have the right to appeal. Request the denial in writing, review the specific reason for denial, submit an appeal with supporting medical documentation, and include letters from your treatment provider explaining medical necessity.

External Review

If internal appeals are unsuccessful, you can request an independent external review. This process involves a neutral third party evaluating whether the denial was appropriate.

State Resources

New Jersey's Department of Banking and Insurance handles complaints about health insurance coverage and can advocate on your behalf for coverage disputes.

FAQ

Will my employer know I am using insurance for rehab? No. HIPAA protects the confidentiality of your medical information. Your employer's HR department does not receive notification about specific claims or diagnoses. Insurance communications go directly to the subscriber.

What if I do not have insurance? Options include Medicaid enrollment, state-funded treatment programs, sliding scale fees, and publicly funded facilities. SAMHSA's helpline (1-800-662-4357) can help find free or low-cost treatment options.

Does insurance cover the full cost of rehab? Most insurance plans require some cost-sharing through deductibles, copays, or coinsurance. However, your total out-of-pocket costs are capped by your plan's annual out-of-pocket maximum.

Can insurance limit how long I stay in treatment? Insurance companies use medical necessity criteria to determine the appropriate length of stay. If your provider documents ongoing medical necessity, coverage should continue. Denials of continued stay can be appealed.

References

• CMS. (2023). Mental Health Parity and Addiction Equity Act.
• SAMHSA. (2023). Insurance Coverage for Substance Use Disorder Treatment.
• NJ Department of Banking and Insurance. (2023). Health Insurance Consumer Resources.

Written by the Valley Spring Recovery Center Editorial Team

Ready to take the first step toward recovery? Contact Valley Spring Recovery Center today at (201) 781-8812 or reach out to our admissions team for a free, confidential insurance verification.