Eleven states mandate coverage of inpatient and outpatient mental health care in private health insurance. Health insurers have objected to these laws on the grounds that they interfere with consumer choice of health insurance benefits and are too costly. This paper analyzes the benefits and costs of mandates for psychotherapy. The potential benefits considered have to do with adverse selection in insurance markets and the offset effects of psychotherapy. Arguments based on economic efficiency are presented to justify the possible appropriateness of overriding individuals' choice of health insurance benefits. Mandates are estimated econometrically to increase the cost of psychotherapy in a state by about 10–20 percent. We conclude that mandates for mental health benefits in private health insurance may be reasonable state policy.

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