We discussed the cash therapy client in a previous post. In that post, we shared strategies on how to attract more self-pay therapy clients. However, there’s also another issue worth exploring: should you accept insurance in your private therapy practice? As with anything, there are pros and cons to the all-cash private practice. This article should hopefully provide some food for thought.

The basics of mental health insurance coverage

The Affordable Care Act requires marketplace insurance plans to cover mental health care. However, the vast majority of Americans aren’t on marketplace plans but plans provided by their employers. Employer health plans do not have a mental health requirement (though most plans do offer a benefit.)

For plans that do cover mental health, the 2008 mental health parity law requires that mental health treatment not be treated differently, but be on equal standing with other medical services. However, this law only applies if the health plan offers mental health coverage.

An additional wrinkle in the mental health parity law is that many health plans are exempt from the requirements including:

  • Employer plans under 50 employees
  • Medicare
  • State government employee plans such as those for teachers, university employees, and other state workers

Additionally, plans that do offer mental health coverage treat mental health as a “specialty” and thus charge co-pays that are often much more expensive than a simple primary care visit. Copays can range from $20-$50 or more and the number of sessions is often arbitrarily capped. Some plans offer 10 sessions per year, some may offer as many as 20.

Once the client has reached that limit, insurance will no longer cover the treatment. Interestingly, there are no such caps on primary care visits! A patient can have unlimited sore throats but they ought to be considerate and limit their panic attacks or severe depressive episodes to the prescribed 10 visits right?

Administrative costs for the counselor accepting insurance

As any practitioner would tell you, accepting insurance isn’t always simple. There are claims to submit, eligibility to verify, extensive documentation requirements (that can often vary among insurance providers.) There’s also the concern over unpaid claims or payment delays. This isn’t to say accepting insurance is a bad thing, however, it does introduce some significant administrative burdens. Behavioral health billing, when mixed with insurance, can become a complicated beast!

Advantages of the self-pay therapy practice

While there is certainly an advantage to accepting insurance in your private behavioral health practice, the main one being that many potential clients will not book a therapy appointment without insurance. The other advantage of accepting insurance is that the insurance company networks can serve as a great source of clients. However, if you are able to develop a cash practice, you’ll enjoy substantial administrative and financial benefits, assuming you can increase your self-pay therapy client pipeline.

Self-pay therapy patients are often highly motivated

Simple laws of economics don’t exempt the mental health business. The degree by which a person values a good depends on what they must give up to obtain that good. When something is “free” as with an insurance-covered therapy appointment, it has a lower perceived value than if the client had to spend actual money.

French university students are a great example of this idea. Universities are “free” in France, however, this has resulted in lower academic achievement, declining facilities, less “seriousness” about university education. If you’ve ever had to pay your own tuition at university, you make double-sure that you show up for classes, complete your assignments and work as hard as possible. If a student weren’t footing the bill, there’d be less urgency with completing the course of study. Of course, this is a generalization, but for anyone that has worked your way through college, you certainly understand!

The same human nature applies to behavioral health appointments. Self-pay clients are generally more highly motivated than insurance clients. Their incentives to solve their problems are aligned with their incentive to get the most value from their hard-earned money.

Set your own therapy appointment rules and prices

How much does something cost? Whatever someone is willing to pay for it.

In the self-pay world, you set your prices, you also aren’t required to render a diagnosis in order to justify an insurance claim. This can provide you with more treatment freedom as well as time to actually get to the root of the real problems your clients may be facing without the pressure to quickly apply a diagnosis. A pressured diagnosis also creates an ethical dilemma.

You can also set your own payment schedule. Your fees are determined by the market, not bound by a sometimes arbitrary insurance formula.

A self-pay practice can increase your treatment quality

With fewer clients and presumably charging a higher session fee, you’ll make the same money but more importantly, you’ll also be less stressed. You’ll have more time to enhance the experience of your clients. It’ll also improve your own mental health since you won’t feel under as much pressure.

Interestingly, having fewer clients paying a higher rate will leave you with more time to strengthen your therapist brand, improve your marketing and thus attract even more higher paying clients.

You can fairly easily adjust your client load by simply adjusting your prices for new clients. As you start to reach your limits, increase your prices for new clients. If you start to have fewer clients than you would like, then lower your prices. Your pricing should affect supply and demand. Your supply of sessions available (given your quality of life considerations) with the demand of clients willing to pay that price.

Self-pay simplifies your therapy practice management

With a cash practice, you can get paid immediately. You can make it simple for clients to pay using cash or a credit card. Everything is simplified once you take the insurance administrative burdens out of the equation. With a system like the upcoming iCouch, you can manage your invoicing and billing with ease — even sending payment requests to a client’s mobile phone as well as automatically collecting cancellation fees per your established policy.

Insurance is still important!

This article should not be construed as advocating that all mental health practitioners abandon insurance. It’s still very important that people with insurance have access to quality care. However, that being said, the ideas in this article are worth considering if you’re feeling any of the pains that accepting insurance can cause your practice.

If you still feel that accepting insurance is important in your practice, it’s possible to practice a hybrid strategy. However, be aware of any contractual issues that might be present between you and the insurance companies. This article from a physical therapy business expert introduces some important considerations if you choose to do a hybrid insurance-cash behavioral health practice.

Published by Brian Dear

Brian is the cofounder and CEO of iCouch, Inc. He has an extensive background in software engineering, inbound marketing and mental health practice management.

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  1. Honestly this article seems to an internal rationalization for why the poor don’t deserve care from some one who was educated to know better. If you can afford to pay out of pocket, you don’t need nearly as much help.

    1. Nobody is suggesting that anyone doesn’t deserve care. If we want to approach this from the data, poor people are far less likely to be insured than richer people, which means that a practice that depends on insurance clients as their primary source of income is going to be less able to serve poor, uninsured patients because the insurance client reimbursement is much lower than what a typical cash patient would pay — which means a private practice would be less able to provide discounts or sliding scale services because their overall operating margins would be much less than a cash-only practice.

      We’ve worked with hundreds of practices over the years and typically, practices that see more cash patients are the ones better equipped to offer sliding scale services because they can subsidize their charity services with higher-yield full-price clients.

      The idea that people that can afford mental health care don’t need it as much is completely false. That’s like suggesting that poor people are more likely to catch a cold than a rich person — the data doesn’t support that. Mental illness isn’t a disease of poverty, it’s an equal opportunity villain. Suicide rates are not higher among the poor, for example.

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