Ketamine and Psychedelics as a Treatment for Mental Health Conditions: Employer FAQs

Interest in ketamine and other psychedelics for treatment-resistant depression and additional psychiatric disorders has grown in recent years, driven by new research on their potential clinical benefits, but there are several considerations for employers that should be top of mind.


January 25, 2024

Interest in ketamine and other psychedelics for treatment-resistant depression and additional psychiatric disorders has grown in recent years, driven by new research on their potential clinical benefits. The approval of Spravato®, a patented derivative of ketamine in 2019, and a deeper understanding of the different mechanisms by which these drugs work compared to traditional mental health treatments are two reasons for evolving perspectives on psychedelics. In fact, for those with serious, treatment-resistant mental health conditions, psychedelics represent a novel opportunity to achieve improvements in symptoms like chronic exhaustion, anxiety, emotional instability and suicidality. Still, psychedelics come with risks and should be considered only one part of a broader treatment approach that often includes therapy and antidepressants. Furthermore, psychedelics should only be considered for patients who meet clinical criteria.  

For more information on psychedelics, check out the Business Group on Health podcast episodes on the topic from February 2022 and February 2024 (coming soon!)

In addition, a recording and slides from the Business Group’s “Innovation Showcase on Psychedelics” will be available on February 13, 2024.

Given the growing prevalence of ketamine clinics and a pipeline of other psychedelics anticipated to receive approval from the Food and Drug Administration (FDA) approval in 2024 and 2025, employers need more information about this topic. These FAQs present important information for employers and their partners encompassing topics such as psychedelics as a treatment for mental health conditions, how they work, evidence on effectiveness, and other employer considerations.1,2

1 | Are psychedelics currently FDA approved for mental health treatment?

Generic ketamine has been FDA-approved for decades only as an anesthetic during surgery. Spravato, a patented formulation of ketamine, was approved for use for treatment-resistant depression in 2019. Using ketamine or other psychedelics as a part of the treatment for mental health conditions (as opposed to using it for anesthesia) is sometimes called ketamine-assisted therapy (KAT) or psychedelic-assisted therapy. Ketamine clinics have opened mostly across the U.S. to deliver Spravato, as well as generic, off-label ketamine. (See questions 4-6 below to learn more about how these clinics operate).3

Other psychedelics are not FDA-approved and are illegal in most places around the world. In the U.S., some states like Oregon and Colorado, as well as Washington, DC, have decriminalized psilocybin (though it remains illegal federally). Outside the U.S., Australia approved the use of MDMA (aka Ecstasy) in 2023 for PTSD and psilocybin for depression in controlled clinical settings.4,5 Other countries with relaxed laws for certain psychedelics include Brazil, Jamaica, the Netherlands, Peru and Portugal (though laws are subject to change).6,7

What Are Common Psychedelics?

Found In Nature

  • Ayahuasca
  • Mescaline
  • Psylocibin
  • DMT


  • Ketamine. (See below for more information on why ketamine is sometimes not considered a psychedelic, but included here.)
  • MDMA
  • LSD

Is Ketamine a Psychedelic?

Ketamine is used for similar cases as other psychedelics in mental health treatment, which explains why they are often lumped into the same category, despite differences in the way they work in the brain. Some practitioners, however, believe that the differences between the two are significant enough to refer to them separately as categories. Nonetheless, companies approaching employers to create a “psychedelics benefit” are currently focused on ketamine because it is FDA-approved and are promising to add services related to LSD, MDMA or other psychedelics if/when they are approved. Therefore, both are addressed in this FAQ. The document notes where distinctions are pertinent and may affect employer strategy.

There is speculation that the FDA will approve additional forms of psychedelics in 2024-2025. In fact, the FDA published specific guidance for researchers in June 2023, increasing the anticipation of approvals.8

2 | Is psychedelic- or ketamine-assisted therapy covered under standard benefit plans?

Insurers already cover ketamine for general anesthesia and Spravato for treatment-resistant depression. While off-label use of generic ketamine in clinics for mental health is legal, most insurers do not cover it under their standard medical policies because of its lack of FDA approval for those conditions. A few health plans cover intravenous ketamine for depression or PTSD with rigorous reporting and clinical criteria.9 Patients generally pay out-of-pocket; employers may consult with their HSA/FSA administrators about how to handle eligibility for off-label ketamine claims submitted by plan members.

Self-insured employers can decide to cover ketamine-assisted therapy that is delivered off-label, regardless of their TPA (third-party administrator)/health plan’s standard coverage. Newer companies that either run or curate ketamine clinic networks have begun selling to employers to help them offer a KAT benefit to employees. Some of these companies expect to offer or curate services for other psychedelic-assisted therapies if or when they are legalized. The offerings and business models for these newer companies are evolving. Employers covering off-label ketamine treatment for mental health will need to scrutinize clinical protocols and outcomes of the sites of care in which they provide coverage.

3 | What conditions are treated with ketamine and psychedelics? 

Ketamine is currently used for general anesthesia and in emergency departments for sedation, pain management and suicidality.10 Spravato, a derivative of ketamine called esketamine, is a nasal spray used for chronic, treatment-resistant depression.

Treatment-resistant depression (i.e., depressive symptoms that have not responded to at least two antidepressants) and PTSD are the most studied conditions for psychedelics.2 Other conditions being studied include substance use disorder (including tobacco and alcohol,) cancer-related anxiety, eating disorders and others.

4 | How are ketamine and psychedelics administered? 

Spravato is a nasal spray taken by patients in an office setting or at home. Ketamine for general anesthesia is delivered intravenously by an anesthesiologist in a surgical setting to control dosage and rate of administration.

Off-label use of ketamine for ketamine-assisted therapy is also generally done intravenously in a ketamine clinic, though it can also be taken orally or nasally in a medical setting or at home. In research settings and recreationally, certain psychedelics can also be swallowed.

Experts recommend that patients being considered for treatment with ketamine have pre- and post-treatment visits with therapists to ensure that they are appropriate candidates for treatment and can make connections between their treatment and overall mental health journey.

5 | How are health care providers involved in the administration of ketamine- and psychedelic-assisted therapy? Do they need to be credentialed? 

Mental health professionals help patients with infusions, keep them safe while in a dissociative state and guide them to help connect experiences with clinical goals. They can also help treat side effects. For patients undergoing ketamine-assisted therapy at home, they can have a clinician with them in person or virtually, with a paraprofessional or a trusted lay person in attendance.

There are few U.S. state laws regarding any licenses or credentials necessary for ketamine or psychedelic-assisted therapy given that they are prescribed off-label (for ketamine) or used illegally (all other psychedelics with rare exceptions).11,12 Prescribers need to be licensed medical practitioners and have a Drug Enforcement Administration (DEA) license to prescribe and handle ketamine. In Australia, only psychiatrists with specific training in serious mental illness and approval from the Therapeutic Goods Administration can prescribe and administer psychedelics.13

6 | How long does treatment take? And does it need to be repeated?  

The standard course of FDA-approved Spravato is twice a week for 4 weeks, after which patients and providers determine whether further treatment is necessary or could be beneficial.14 Ketamine clinics and companies selling services to employers for ketamine-assisted therapy will generally offer 1-6 session courses of treatment, with one or more pre-treatment assessment visits and follow-up “integration” after each dosage. Integration is the time after treatment when a patient “implements and incorporates key insights and awareness gained in the psychedelic experience into their life,” which studies suggest is key to long- term symptom improvement.15 Clinically guided processing of the experience in integration looks more like traditional therapy.16 Some studies show that clinical benefits wane after several months to a year, while others have found lasting symptomatic improvement for multiple years after one course of treatment.

7 | Are psychedelics effective?

Psychedelics are one potential part of a broader treatment approach for mental health conditions. For patients meeting specific criteria in clinical settings, with concurrent therapy and other medications, multiple studies show improvements in symptoms related to depression – including suicidality – anxiety, substance use and eating disorders for many of patients.17,18 Notably, lasting symptomatic and behavioral improvements have come from treatment courses that last 1 to 6 weeks. However, the body of research on effectiveness is based on relatively small sample sizes.

8 | Are there risks associated with ketamine and psychedelics? 

Short-term risks of both ketamine and other psychedelics more broadly are believed to be low in clinical settings.19 There is less data on the impact of long-term use of either one. Treatment is generally under the supervision of a clinician, who can help address side effects and ensure that patients in a dissociative state are safe. Treatment can cause fear and anxiety, in part due to the fact that patients may be grappling with past traumas that the treatment reveals.

There is concern that ketamine clinics delivering off-label ketamine are not held to specific clinical standards of efficacy and safety found in trials. Additionally, there is a risk of diversion, or drug-seeking behavior after medical treatment, even though risk of substance use disorder is believed to be low. Most national carriers do not cover off-label ketamine for mental health conditions, and employers considering coverage should explore site-of-care restrictions to ensure that employees are getting ketamine therapy from health care providers with established records of quality and safety.20

9 | Do people receiving psychedelics need to take medical leave while in treatment? 

Treatment with ketamine generally lasts about 45 minutes; the full infusion with prep and rest will require 2 or more hours. Patients shouldn’t operate heavy machinery – including driving – for the rest of the day. Patients will typically need a half or full day off when receiving treatment, and may elect to take additional time off to mentally process their experience.

Treatment with other psychedelics like MDMA or psilocybin (i.e. “mushrooms”) will have varying timing for administration – eating a small piece of food is faster than an infusion – but the full timing for prep, experiencing the “trip” and recovery can be up to 4 hours.

Employers will need to consider sick time and medical leave policies when deciding on coverage for these treatments.

10 | How much do psychedelics, ketamine and wraparound services like talk therapy cost?

FDA-approved Spravato was listed at $32,400 for a standard annual course of treatment in 2019.21 This does not reflect the drug’s price net of discounts or rebates or additional medical costs associated with the clinicians and facilities necessary for administration and ongoing concurrent therapy.

Other psychedelic-assisted therapy is off-label or illegal in the U.S. outside of controlled clinical trials, so there is no standard commercial price. Ketamine clinic prices vary, but are often around $500 per infusion, or $2,000-5,000 per course of treatment. In Australia, psychedelics are not publicly subsidized, and costs are estimated to be around $20,000 (AU) when the drug and associated provider fees are fully accounted for a full course of treatment.22

11 | What legal, cultural or public relations issues may impact coverage of psychedelics?

  • Company culture: For various reasons, including stigma and illegality in many circumstances, company leadership may not support providing coverage or programs for ketamine-assisted therapy or psychedelics, even if they become FDA-approved.
  • Increasing mental health challenges: As mental health utilization rises, identified cases of treatment-resistant depression and PTSD are likely to rise as well. Employers will need to step up efforts to identify ways to address these conditions, including via psychedelics.
  • Legal risk, perceived or real: Given the illegality of psychedelics in most places, off-label use of general ketamine and real risks that come from side effects, some are concerned about the risk of lawsuits if a patient or employee has an adverse reaction. The extent of legal risk is unknown because of the novelty of this treatment in medical practice.
  • Risk of inaction: While conventional treatments for serious mental illness are often effective, they fail many patients who, if untreated, can become significantly debilitated or die. Standard mental health treatment can be expensive over multiple years. Employers that resist consideration of psychedelics treatment in a future where there are additional FDA-approved formulations may be at risk of leaving some plan members without access to a potentially effective medication. This itself could pose legal or PR risks.
  • Drug testing policy: If an employer has a drug testing policy that bars employment for people who test positive for psychedelic compounds, this may conflict with a concerted effort to increase access to KAT or psychedelic-assisted therapy if the latter is approved by the FDA.
  • Changes to a rapidly evolving industry: While the science is emerging, stakeholders across health care, benefits and government are getting their arms around what ketamine and other psychedelics will mean for mental health treatment, costs and access to care. Implications, opportunities and unintended consequences will continue to evolve over the coming years.

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More in Benefits Strategy


  1. Are psychedelics currently FDA approved for mental health treatment?
  2. Is psychedelic- or ketamine-assisted therapy covered under standard benefit plans?
  3. What conditions are treated with ketamine and psychedelics?
  4. How are ketamine and psychedelics administered?
  5. How are health care providers involved in the administration of ketamine- and psychedelic-assisted therapy? Do they need to be credentialed?
  6. How long does treatment take? And does it need to be repeated?
  7. Are psychedelics effective?
  8. Are there risks associated with ketamine and psychedelics?
  9. Do people receiving psychedelics need to take medical leave while in treatment?
  10. How much do psychedelics, ketamine and wraparound services like talk therapy cost?
  11. What legal, cultural or public relations issues may impact coverage of psychedelics?