Insurance vs. Private Pay

To paraphrase Hamlet: To accept insurance, or not to accept insurance, that is the question.

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Whether 'tis nobler in the mind to suffer the slings and arrows of outrageously low negotiated rates, or to take arms against Big Insurance and by resigning from panels, end a reliable income stream...

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Aye, there’s the rub.

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This is not an easy decision! Don’t fall prey to a belief CBT teaches us is irrational: “There is a perfect solution to this problem, and I must find it.”

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But knowing the advantages and disadvantages of accepting insurance in private practice will help you make the decision...even if that decision is ultimately “I’m going to have a blend of insured and private pay clients.”

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Insurance advantages

• A steady stream of referrals. (This is huge.)
• Freedom from the daily chore of marketing your practice.
• The ability to see clients from all walks of life, instead of having a practice consisting solely of wealthy individuals.
• The satisfaction of knowing that you are not creating a problem for your clients (significant debt) while solving another problem (their presenting issue).
• Greater variety in your work — for example, significant mental illness is more rare among self-pay clients, who may largely consist of “the worried well” (as my physician friend once described them).

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Insurance disadvantages

• Your negotiated rate with various insurance companies is likely to be ½ to ⅔ of the fee-for-service rates common in your local community. (Another big one.)
• The application process to be “paneled” by an insurance company is a paperwork nightmare, and there is no guarantee that you will be accepted after all the work.
• Insurance billing is a complicated process; much more difficult than simply charging the client full fee at the time of service
• You will have to devote a VERY significant amount of time to marketing (presentations, touch-base phone calls, visits with referral sources, attending meetings and social events that you otherwise would skip)
• You are forced to assign a diagnosis, and this diagnosis may affect your client’s life (e.g. higher life insurance rates if you diagnose Major Depression).
• There may be session limits to the care you can provide annually, and you may have an insurance adjuster looking over your shoulder to scrutinize your treatment plan

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You may notice from the above a curious incongruity: by avoiding insurance, you will see higher-functioning clients, have more independence, avoid most paperwork...and yet make more money per session.

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Apparently, life doesn’t have to make sense!

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But don’t forget: a fee-for-service practice is much more likely to have empty hours, and be much more difficult to maintain.

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Many therapists take a familiar career route: after graduate school, they work for an agency for a while, then move to an insurance-based group practice as an employee or contractor, then start their own private practice after establishing an individual reputation in their local community. The private practice can start out with mostly insurance clients, and move over time to mostly or wholly fee-for-service clients.

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It is not a bad route to follow!

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