Private Pay vs. Insurance: How to Decide if Being a Private Pay Therapist is Best for You

Whether you are just starting out in your private practice or have been a mental health provider for years there is always the debate of networking with insurance companies or being a private pay only provider. This is very much a personal choice that needs to be decided after balancing out the pros and cons of each pay structure and how your decision will affect your ideal clients.

Private Pay Therapist vs In-Network Therapist

A full private pay provider means that the professional has decided to not panel with any health insurance companies to become 'in-network'. A private pay client would pay for services with cash, check, or credit card. The client is responsible for payment of 100% of the session fee. This business may call themselves a "private pay practice", "cash-based private practice", or a "self-pay private practice" when marketing.

The professional may also accept FSA/HSA cards for some covered services, which is dependent on the agency the FSA/HSA card is through. Not all therapy services are eligible.

Providers who accept insurance are considered 'in-network' with insurance companies that they are accepted into after applying and sign a contract with. If a provider accepts one insurance, it does not mean that they accept all insurance.

To become an in-network provider (sometimes called 'getting on insurance panels'), the professional must go through a credentialing process where their professional information is reviewed and need for services in that providers area is examined.

If the provider is accepted, they will be offered a contract to review and sign. Once signed then they can start taking insurance as a form of payment.

Insurance Company Credentialing and Billing Overview

Providers who decide that taking insurance is a strategy that will benefit their business have a few steps to complete before getting the green light to start billing. The credentialing and billing process can be complex, so this is a broad overview of what to expect.

Insurance Credentialing Process

The provider will need to get credentialed through a credentialing professional or can choose to DIY. This process essentially involves completing applications for each insurance company that the provider is interested in networking with.

The applications are completed through a website called the Council for Affordable Quality Healthcare (CAQH). Many professionals find that the application process is heavily involved and complex when compared to paying a trained credentialing professional to do the work.

To complete an application through CAQH a provider must be invited by the insurance company, which involves a pre-application to the company, prior to filling out the CAQH application.

If this already sounds confusing, you are not alone! Some providers report that each application can take 10 hours to complete. When factoring in how many clients could be seen in 10 hours it may be more reasonable and cost-effective to hire out in this area.

If the insurance company accepts the provider in their network, it may not mean that the professional is able to accept all insurance plans under that company. They will find out in the contract which plans can be accepted or can check with the company prior to seeing the client.

The provider will send their own rates to the insurance company, but that does not mean it will be the rate the company pays. All of this will be outlined in the contract.

Insurance Billing Terminology

It is ultimately the client's responsibility to understand their insurance coverage but having an understanding of this as the clinician can save you money in the long run.

Many clients will have a deductible, money that they must pay out-of-pocket, before insurance starts to pay. If the client's deductible is $500 then they must pay all $500 for any healthcare service before there is coverage from the company.

The client pays at the in-network rate which may be different than the professionals standard rate (often a deal). Remember, this is what is negotiated with the insurance company and is a benefit to the client for using their health insurance since it is typically billed at a lower rate.

Some clients will have a co-pay. This is a fixed cost that is paid for a covered service. For example, the client may be responsible for paying $20 of the session fee every visit and the insurance covers the rest.

Other clients will have coinsurance which is a fixed percentage of the service they must cover. For example, a client may be responsible for 20% of the session fee and insurance will cover the rest.

At some point the client's out-of-pocket maximum may be met for the year. This means that insurance will now cover 100% of the fees associated with healthcare services.

Collecting an Insurance Payment

Once the professional provides covered treatment to covered clients, they will submit claims to the company. These claims are reviewed and accepted or denied. If accepted, the payment will be received by the professional in about a month after services were provided. If denied, a new claim will have to be submitted with changes based on the initial rejection. This can be another long process that billing professionals can take over.

Earn More Revenue for Your Practice with Private Pay Clients

Many therapists question their ability to own a successful private pay practice. It is possible for private practice owners to start with a private pay only model from the beginning.

As a private pay therapist, you have the potential to earn more revenue since there will not be limits on your established rate. Some therapists are hesitant to accept private pay clients only due to being conscious on what clients can afford. Although this can be an entire article, many clients realize that long-term healing is worth the price. You can focus on equity in your private practice by offering a sliding scale, lowering the cost for some clients in need, volunteering in your community, or offering a few pro-bono spots.

Offer Short Waiting Times

There is more turbulence with seeing private pay clients only. Revenue is often dependent on the economy and time of year. An advantage to this is that you may have shorter wait times for potential clients that find your therapy practice at certain times of year. New patients are often seeking services during times of emotional hardship so being able to get people into therapy quickly is important.

Private pay clients may also be more motivated clients that want to meet with the professional intensely up-front compared to extending weekly/bi-weekly services over a long period of time. This can also create shorter waiting times since they could meet goals faster or use a more titrated booking approach.

Offer Unique Services

Developing well thought out marketing strategies will set you apart from other practices regardless of their payment model. It also helps if you can market a specific niche where you can establish yourself as a trusted healer in the community that really understands the needs of prospective clients. There are some insurance limitations with unique treatment options that are emerging in the field. You will have more freedom in your practice by not accepting insurance if providing emerging treatment is important to you.

Deciding How to Get Paid for Services

It may make for sense for you as a professional to choose one billing option over another. A few factors into this decision include the culture around healthcare in your area, input from potential clients seeking therapy services, number of sessions your clients generally need to heal, your niche expertise, and your comfortability with navigating the insurance world.

Accepting insurance also has overhead for therapists, especially if you are utilizing other professionals for backend support. On the flip side there is less marketing that is needed compared to private pay therapists. You need to do what makes sense for your business based on your bottom line or desired energy output!

Diversifying with Private Pay and Insurance Clients

Many private practices decide to seek a combination of private pay clients and insurance clients. As the therapists get more established, they will often move to a private pay only model, or significantly reduce the amount of insurance companies they work.

Some individuals prefer to avoid using their insurance if they have poor mental health coverage. In general, most people who have good health insurance coverage will want to use it. But anyone is largely willing to pay the full-fee private pay cost toward a therapy practice that they believe will heal them.

No matter what pathway you choose, having a marketing strategy will be important. This is even more important if you exclusively see private pay clients.

Get practice policies in place

It is important to create payment policies that outline your practice boundaries around money. This is especially important for the insurance world or if you choose to provide lower cost services (like a sliding scale) to ensure equability. We have fee forms on the Elevate Health Collective website that have been reviewed by a lawyer and are 100% editable. We also recommend that you seek advice from your own lawyer to make sure you are following state law.

Spending time outlining your practice policies to potential clients will help ensure that you mitigate legal risks while also checking in on what your client can afford to make modifications to their rate as applicable.

Communicate with existing clients

There is still a lot of work that is needed in this field around communicating payment models and equability toward professionals with clients. You can help influence mental health reform by being transparent with all the clients you talk with about your financial model and practice policies. Private practices that elect to use the private pay model may have to do more marketing around what this model means for their ideal client to communicate the benefit to the client and the professional.

Ready to See How Brighter Vision Can Help You Get More Clients?

Regardless of what model you choose to use in your practice, we are here to help. Making these big decisions can be stressful, but it doesn't have to be! From offering individual coaching to on-demand courses we can help you navigate the insurance or private pay model to ensure success in your private practice!