You’re in private practice and you’ve decided to take insurance as a way to create accessibility for clients with a lower income. But working with insurance as a therapist doesn’t always guarantee that your business doors will remain open, even if you get a ton of referrals. You have to be reimbursed at a rate that works for you and your needs.
Often people start out contracting with insurance companies without fully understanding the money math involved. So, if you’re finding that you aren’t being reimbursed enough by insurance companies, you aren’t alone.
We want to help you not only keep the doors open to your business but also bring in an income that helps you sustain a GOOD life for you now and in the future. Today, we want to show you how to navigate and understand reimbursement rates and how to ask for a raise when you’re underpaid in your insurance contract.
Let’s first talk about insurance reimbursement rates for psychotherapy and where they come from. You could ask your colleagues about their rates, but the truth is, there are a lot of variables that play into what you’re going to get reimbursed.
Here are some of the most common factors that influence your reimbursement rates as a therapist:
Generally speaking, a psychologist will often be reimbursed higher than a master’s-level therapist (LMFT, LPC, LMHC, for example). There may also be a higher reimbursement if the insurance company doesn’t have enough of your license type to meet demand in your area.
This is how location plays another major factor in the rate you’re reimbursed. Your rate could be set simply due to demand and availability. For example, rates of reimbursement are generally lower when there’s a saturation of clinicians applying for the insurance contract.
The insurance company no longer needs to be competitive on the reimbursement rate. This can leave people in expensive locations making less per hour than those in more remote or less saturated areas. As a therapist in private practice, or even a therapist running a non-profit- it is up to you to determine the expenses for running your business and living your life.
There is absolutely NO requirement for insurance contracts to provide a livable wage, or even provide a wage that is more than minimum wage for all hours worked. The government expects that as a business owner, you will only sign contracts that are in your best interest. The protections in place for W-2 employees are NOT in place for you as a business owner.
Also, note that some states have legislation that impacts what insurance companies must reimburse for but there is seldom regulation on what the reimbursement must be.
Regardless of the factors for what you’re reimbursed, you won’t find out what you’ll be paid until you’re accepted into their network. This means, typically, you have to apply and then when you read the contract, you’ll find out the rates. You may have already invested a significant amount of time, money, and energy when you get the final contract and it may feel like a no-brainer to sign. However, please know your numbers and read and really decide if this works for you before signing.
Reimbursement rates for psychotherapy vary. What you start off with can be changed. Read your contract with an insurance company and you’ll find that they can sometimes change the rate with little to no notice. Your rate is specific to you and the factors we discussed earlier.
In fact, we’ve had clinicians within 10 miles of each other be reimbursed by insurance at a difference of $50 an hour with the same insurance company.
Clawbacks are a real thing that happen to many people with contracts. A clawback is when you’ve been reimbursed, and the insurance company comes back and states they overpaid you. Maybe there was an audit that determined there wasn’t a medical necessity or a change that didn’t take effect immediately in their billing.
In other words, a lack of understanding of medical necessity or poor documentation could lead to a clawback. If you don’t understand the medical necessity or don’t like documentation and want to take insurance- it is VERY important that you make friends with documentation. We do NOT want you to not be paid for the services you provided.
You are responsible for paying back the money the insurance claims even if you did nothing wrong. You could have excellent documentation, you could have clear approvals from the insurance company- and they could find they made a mistake. But, who pays for their mistake? YOU!
Be sure to read your contract carefully. In some states, they have passed legislation to limit clawbacks to one year after the claims are originally paid or filed. In other states, there is no limit and clawbacks could come back YEARS late (we’ve seen examples of 6-10 years later). While your client may have signed paperwork saying that they are responsible for anything the insurance doesn’t pay- collecting this money so long after treatment can be near impossible.
These clawbacks can sometimes come in the form of a letter and a bill that says pay this now or we’ll start taking this from your future reimbursements. OR, in many cases, we find that it simply comes from your reimbursement suddenly being much lower.
In at least one case we worked with, the clinician paid the requested money well in advance of the date requested AND the insurance company still pulled the money out a SECOND time from their reimbursements. So, they suddenly had an overdraft account and were struggling to pay their rent. They had already pulled over $5k from their limited savings, and losing another $5k in the span of a few weeks was devastating.
This is one reason why people decide to leave insurance contracts. Thousands of dollars can be claimed. We’ve seen practices go bankrupt and have to shut their doors from clawbacks.
Some states have a statute of limitations on the time the insurance has to claw back the money, but many states don’t. Check your state regulations and advocate with your lobbyist for change. In the meantime, if you decide to stick with insurance companies, we recommend having savings if and when clawbacks happen.
There’s a common discussion amongst therapists about which insurance companies reimburse the best. Blue Cross Blue Shield (BCBS) is often brought up, even in discussions amongst clinicians on opposite ends of the country. BCBS has separate entities or networks in each state, which means not all BCBS plans are the same.
While you must be under contract to see the current reimbursement rates, we know based on feedback that reimbursement rates range on average from $65 to $100+ per 45-minute psychotherapy session. That’s a huge range when you think about the compounding impact on a therapist’s take-home pay.
When considering working with BCBS in your area, ask other clinicians about their experience with reimbursement timelines, rates, and clawbacks. If you’re already on a panel with BCBS, continue below to learn how to negotiate your rate.
Before we jump into how to negotiate your insurance reimbursement rate, we wanted to also mention Tricare, which is part of the military health system. It’s government-managed health insurance. Many clinicians who choose to work with Tricare are passionate about serving the military and veterans and often see enrolling with Tricare as a way to give back to their community.
That said, the same applies to Tricare as other insurance companies. Rates can vary and clawbacks can happen. While you may give back to the community, you’ll still need to have a good reimbursement rate — one that works for your financial plan in order to continue to serve this population.
Maybe you’ve taken our free How to Set Fees training, and now you know what fee you need to charge in your private practice. You learned that your fee needs to be sustainable, allowing you to see the number of clients that are right for you energetically. That way you can provide excellent services across the board, allowing you to take time off to rejuvenate, care for yourself when you get sick, and even have time for training and consultations.
Your fee also allows you to take care of your needs in your personal life. This is why your fee is uniquely your own and cannot be compared to others. Your situation, ability, and needs are entirely different of those of your colleagues.
Once you know your fee, you can compare it to the reimbursement rate of the insurance companies. Don’t be surprised if you would have to see double the number of clients on an insurance panel compared to what you need for a cash-pay practice. That’s a common realization.
But in looking at the fee for reimbursement, it doesn’t mean you’re obligated to accept it. You can negotiate. You can advocate for better — for you and your clients.
The biggest mistake you can make is to never ask for better.
As long as we all accept what’s given, the insurance company will never need to change. One of the biggest ways we’ve seen change happen is through insurance task forces as part of local associations. When large groups come together to advocate for change, there’s a great likelihood for the insurance company to make a change. Call your association and see if there are options to advocate for better reimbursement rates.
At an individual level, you can send a letter to appeal to the insurance company for a change in the fee schedule. When doing so, you need to speak to what’s unique to you, demonstrating why you’re an asset to their panel and their members. Sharing outcomes data can also demonstrate impact and value to the insurance company.
Here’s a sample letter you can use. This letter is to be sent to the specific insurance panel that you’re requesting an increase from. It’s been composed based on feedback from other members of our Business School for Therapists.
Dear Network Representative,
This letter is a formal request to review my contracted rates as one of your providers. I’m a highly specialized EMDR therapist who works with teens and their families. I have additional training as a somatic experience therapist. I track my outcomes and have over a 90% reduction of symptoms in my clients.
There are no other EMDR therapists in my area who provide this type of highly specialized psychotherapy to teens and adults. I’ve been in private practice over x years and have been paneled with your company for the past 5 years. 30% of my practice consists of clients on your panel.
After reviewing my current rates and analyzing them comparatively to other panels, I’ve determined that they’re not competitive. Below are my current rates, your rate, and the average rates of reimbursement from other insurance companies.
(Insert the following information)
(Insert Insurance Company Name) Rate
Rates from Other Insurance Companies
In order for me to continue to provide highly specialized care to teens in my area and to continue to serve on your panel, I’m requesting that you consider a rate increase. I value working with you on this, as I can no longer continue to see your clients at the current rate. Please respond within 2 weeks of receiving this request via email at xxx@xxxx.com or by phone at xxx-xxxx. Thank you.
After advocating by contacting the insurance, if you continue to have issues or a lack of response, you can contact your insurance commissioner. There are many reasons why you as a business owner would contact the insurance commissioner in your state:
We hope this encourages you to advocate for what you need to do good work with clients and to take care of yourself as a clinician.