An excerpt from this article can be found at https://www.heytiffany.com/problems-with-insurance-for-therapists-in-private-practice/
Brianna D. Mann, Ph.D.
Reasons Providers Credential with Health Insurance
The reasons why providers credential with the insurance companies are reasonable. First, credentialing with health insurance is the status quo; it’s what everyone does. Second, credentialing is one way to ensure that providers have a steady referral stream without having to do a lot of outside marketing. Third, credentialing with insurance allows providers to provide access to care to a wide demographic of individuals, including those who might not be able to afford therapy out-of-pocket. Fourth, the benefits of credentialing compensate for skills deficits and fears most mental health providers have: A) Few therapists know how to market or how to run a small business, because these are not skills taught in graduate school. Therapists have little confidence in succeeding in marketing and business management. B) In fact, these are skills that are discouraged both explicitly and implicitly throughout therapists’ training; marketing and running a business that makes money are seen as “bad”, and running a charitable practice with “affordable” fees and pro bono work is seen as “good”. C) Many therapists are incredulous that potential clients, who have already purchased a health insurance plan, will be willing to pay out-of-pocket for an additional service. D) Scarcity motivates providers, especially those just starting out, to accept whatever they can get; some money is better than no money. I’m certainly familiar with these rationale and fears, and I don’t fault anyone for utilizing these rationale and trying to mitigate their fears. I do, however, think it’s time to critically examine the ramifications of credentialing with insurance for mental health providers, clients, and the field of mental health for the purpose of making an informed decision about whether to continue this practice.
Reason for Source Anonymity
To gather information for this article, I conducted a literature review and interviewed healthcare professionals. One provision of the health insurance contracts states that credentialed providers are not allowed to discuss the specifics of their contracts, and if they do discuss these specifics, they jeopardize their contracts. As such, many of the healthcare professionals I spoke with required anonymity as a condition of their interview; I am respecting this by not including their names. A discussion of the gag order placed by insurance companies on providers, prohibiting discussion of contract specifics is another article entirely. I point it out briefly to encourage critical thinking regarding the motivation for a gag order. Why would someone in power prohibit someone they have power over from a Constitutional right, freedom of speech? If you don’t know yet, maybe you’ll get a better idea as you read this article. At any rate, I appreciate my sources’ bravery in being willing to share anything at all with me.
I. The Business of Healthcare Has Turned Healthcare into a Business, Not Healthcare
A. Deregulation of Healthcare
1. Conflict of Interest
In 1983, something happened that would change the landscape of healthcare in America forever: The Reagan Administration deregulated healthcare. Specifically, this deregulation changed how providers were reimbursed for healthcare delivery costs. Previously, third-party reimbursement for healthcare to providers and larger entities, like hospitals, utilized a relative cost metric: Reimbursement rates were based upon the providers’ costs to provide the service along with a bit more to provide profit, which seems logical, linking reimbursement amount with actual service cost. With the changes to the law, the insurers changed their reimbursement metric from a relative rate to a fixed rate for each service, irrespective of true cost. If a service cost $100 to administer, the provider would no longer receive $100 plus profit, they would receive a fixed rate predetermined by the third-party payer. And, if the fixed rate was lower, for example, $80, the provider lost money. Now, rather than operating according to best practices and being reimbursed for the costs of operating according to those practices, providers were motivated to avoid a loss, and a conflict of interest developed: Operate according to best practices and potentially lose money or cut costs and operate as well as you can within those cost constraints. The change in reimbursement metric turned healthcare from a service industry into a business, and significantly increased third-party payers’ profit margins. Not only did reimbursement metrics change, many aspects of healthcare became for-profit, catering to investors rather than consumers (Frakt, 2018).
2. Power Differential
If a conflict of interest develops between profit and best practices, there would need to be a regulatory system to ensure that consumers aren’t harmed by such a conflict. But, in order for such a system to function, several conditions would need to be met. First, consumers would need to be aware that a conflict of interest with the potential to cause harm exists. And, I’m not entirely sure that most consumers are aware of how healthcare deregulation in the 1980’s has affected them. Second, someone would need to draw attention to the conflict of interest and ask for change. Third, that someone’s voice would need to be loud enough for someone else to take action. Whose voice is typically louder: the average American consumer or a multibillion dollar industry? Fourth, a mechanism would need to exist for holding an industry or company accountable. Under the Obama administration, there was a cabinet position for consumer protection; the funding for that position has since been eliminated (Grunwald, 2018). Fifth, even if the industry or company is held accountable for a specific incident, how likely is it that large scale changes will be made? Further, what is the likelihood that all of these conditions will be met? And, what typically happens when powerful, wealthy individuals or entities get in trouble? The problem here is a huge power differential between the average American consumer and the health insurance industry; this power differential renders consumers defenseless to protect themselves and ask for change.
3. The Goal of Health Insurance is Not to Help You, It’s to Make Money
a) An “Ingenious” Formula with a Low ROI for Consumers
The health insurance industry’s goal is not to help consumers, it is to make money. I don’t think that’s really a secret. That’s capitalism. But, it’s important for consumers to remember this fact when they are spending five figures on a policy to cover their healthcare expenses. What consumers also need to remember is that the product they are buying has an incredibly low return on investment (ROI) and is designed for the purpose of having an incredibly low ROI; that’s called the insurance company’s profit margin.
Do you know how health insurance companies make money? It’s a pretty simple formula: Insurance costs to consumers > reimbursed health care expenses. On average, insurance companies need to collect more money in premiums than they pay out to consumers in health care expenses. It’s no secret that this is how this works, but for some reason most of us consumers have it in our heads that using insurance gets us a good deal on our healthcare. It doesn’t. In fact, insurance companies call consumers’ medical expenses their “medical loss ratio”; in other words, having to pay for the service consumers purchased from them is seen by insurance companies as a loss, not as providing a service. Their hope is that consumers won’t use their service, and if they do, it’s seen as a loss (Lazarus, 2017).
I know that many insurers file their taxes as non-profit entities, but consumers should know that “nonprofit” doesn’t mean a company doesn’t make any money. Non-profit status means that the company “…uses its surplus of the revenues to further achieve its ultimate objective, rather than distributing its income to the organization’s shareholders, leaders, or members” (Wikipedia). So, the insurance companies can make a profit, they just can’t distribute it to shareholders, rather, they must use it to achieve their “ultimate objective”. What is the “ultimate objective” of the health insurance companies: to minimize their “medical loss ratio”? I really don’t know; that would be an important question to answer. A very curious fact is that the non-profit health insurance companies’ CEOs sure seem to make a lot of money. According to a Minnesota Star Tribune article, the state-level CEOs of the insurance giants, Blue Cross, Health Partners, Medica, Health Partners, and UCare made $3,100,000, $2,400,000, $2,100,000, $929,900, respectively in 2017 (Kennedy, 2017). And these are just their base salaries, when stock options and other perks are factored in, you can take the base salary, double it (and then some), and then add a zero to the end. For example, in 2017, UnitedHealth Group’s executive chair made a base salary of $1,206,538, but with stocks and perks, total compensation was $26,975,932 (Kennedy, 2018).
b) How the “Ingenious” Formula Impacts Consumers’ Care
If low ROI was the upshot of Americans purchasing and utilizing health insurance plans to cover healthcare expenses, that would be disheartening, in and of itself. Unfortunately, low ROI is not the upshot; the upshot of Americans purchasing and utilizing health insurance plans is that deregulation of healthcare and the insurance industry have turned healthcare into a business, not a service, and the medical care consumers receive is suboptimal as a result (Frakt, 2018). Let me summarize: When people purchase insurance, 1) they lose money and 2) their healthcare is suboptimal. I don’t know about other consumers, but for me, there are only certain areas I’ll accept suboptimal (e.g., vehicle, internet carrier) and other areas I certainly won’t (e.g., healthcare, oxygen quality).
B. The New Era of Healthcare: Assembly Line Care
The changes that resulted from the deregulation of healthcare in the 1980’s turned healthcare into a business, a factory, if you will, and turned talented medical doctors into assembly line workers (Powers, 2017). Mental health providers are on the same trajectory. Remember, the deregulation led to a change in the insurance reimbursement metric such that services are reimbursed at a fixed rate, determined by the insurance company rather than the actual cost of services, and this led to a conflict of interest for providers and health care systems: Provide care according to best practices and potentially lose money, or cut costs and provide care as best you can within those cost constraints. At a basic level, this involves maximizing billable time and minimizing overhead, including unbillable time, medical services with low profit margins, additional staff, etc. Even prior to deregulation, the health insurance industry was motivated to maximize profit margins. The problem that was created with deregulation was that now both the insurance company and the provider/health care system were motivated to decrease costs and maximize profit margins, and the pressure placed on the provider/health care system by the insurance company to cut their costs, led to a conflict of interest, which resulted in a decrease in the quality of medical care provided. Indeed the U.S. is now ranked #1 in healthcare expenditure (Organisation for Economic Co-operation and Development, 2015) but #37 in healthcare system performance (Tandon, Murray, Lauer, & Evans, 2000).
1. Assembly Line Care in the Field of Physical Medicine
a) Assessment and Diagnosis
The employees of the insurance companies, the doctors and health care systems, are expected to conduct an efficient diagnostic assessment and provide an economically efficient treatment option, usually in under 15 minutes. After that, the provider is expected to complete another diagnostic assessment and provide a treatment option in under 15 minutes, and another diagnostic assessment and treatment option after that, and another diagnostic assessment and treatment option after that, ad nauseam. Not only does this place a tremendous amount of pressure on doctors, it’s not very effective. Not effective but very efficient, and that is the point. I know that an accurate diagnostic assessment for mental health is not possible within 15 minutes; the intake assessment takes around 2-3 hours and assessment is an ongoing process, throughout the course of treatment. Physical medicine is no less complicated, but yet the diagnostic and treatment processes have been severely abbreviated as a result of the insurance companies’ reimbursement policies.
b) The Western Medical Model and Health Insurance: Impact on Policies, and Ultimately, Patient Care
Not only are assessment and treatment abbreviated in physical medicine, other treatment practices are dictated by insurance company policy, not best practices. Western Medicine is designed to diagnose and treat problems at the pathogenic level, which means that the problem needs to progress to the expressed disease state before it can be identified and treated. Unfortunately, the issue is that the problem has already done a great deal of damage to the body at this point, and the damage is not always reversible nor is the problem always treatable at this point. The point at which a patient benefits most from a treatment intervention is earlier on, when the symptoms are more diffuse. Further, Western Medicine is designed to treat symptoms of disorder, not necessarily the underlying problem, so even after the problem’s symptoms have manifested, the actual problem often goes untreated. Quite obviously, the patient benefits most from the treatment of the underlying problem, not the symptoms, but this isn’t how the Western Medical System is set up. (And, nothing against the Western Medical System, it certainly has excellent merits; these are just the drawbacks.) There are schools of medicine (e.g., Ayurveda) and health interventions (e.g., nutrition and health coaching), designed to treat underlying problems, prior to pathogenesis, but the insurance industry will not cover these treatments. For example, Type II diabetes can be treated much more effectively early on, and even prevented by coaching interventions addressing diet and exercise. The problem is that our system is set up to wait until the actual disease has manifested before treatment, including diet, exercise and synthetic insulin administration, begins. At that point, insurance will reimburse diagnostic and treatment costs. Prior to that point, insurance will not cover effective treatments like health coaching or Ayurveda medical interventions. The insurance reimbursement system is set up to favor the Western Medical Model of diagnosis and treatment of the problem’s symptoms (not actual problem) when the problem reaches the pathogenic level.
Further, even after the problem becomes pathogenic and insurance is willing to cover treatment, the treatments are controlled by what the insurance company is willing to cover, and are complicated by the economic motivations of drug dispensaries (i.e., pharmacies). For example, Trintellix (i.e., vortioxetine) is a drug that works for both depression and anxiety, which are commonly comorbid conditions, and it is superior to a similar drug in its class, Effexor (i.e., venlafaxine), because it does not have the sleep side effects that Effexor does. And, as we know, those who suffer from depression and anxiety often experience sleep problems, so prescribing a drug that compounds their sleep problems is contraindicated. Unfortunately, the insurance companies require patients to have failed on the generic of Effexor, venlafaxine, which is cheaper, prior to authorizing payment for Trintellix. Alternatively, in order to avoid the sleep problem and follow the insurance company’s requirements, the prescriber could prescribe three medications, one for depression, one for anxiety, and one for sleep, rather than prescribing one drug, Trintellix. The prescriber is not allowed to practice according to best practices and the client does not receive the best treatment because of the reimbursement rules dictated by the insurance companies. This is the type of care consumers receive when they purchase a healthcare service from a third-party payer.
c) The Business of Healthcare and Your Pharmacist
Further thwarting patients’ receipt of superior drug treatments are the pharmacies. The pharmacies and pharmacists are incentivized to sell generic medications. When a consumer’s pharmacist informs them that there is a generic of the medication they’ve been prescribed, it seems like they are doing the consumer a favor, saving them money. In fact, they are saving the consumer money, but the consumer might not be getting the same drug they were prescribed, rather a similar medication from the same drug class, which may or may not be as effective as the drug they were prescribed. And, the part the consumer does not often realize is that the pharmacy’s profit margin is much greater for generics than for brand name drugs, so pharmacies are motivated to sell generic medications over name brands. Just as the generic is cheaper for patients to buy, it is also cheaper for pharmacies to buy, and they have more room to mark the drug up for profit than they do with brand name drugs, which are already quite expensive. This is why pharmacists push the sale of generics. One of my sources informed me that pharmacists don’t just push the sale of generics, they will actually tell patients that their insurance company won’t cover their brand name drug, so they need to go with the generic. Or, they’ll tell patients that they can’t get the drug in stock or that it will take several weeks to get the drug in their formulary, which isn’t true. The truth is that the patient needs a prior authorization in order to get the brand name drug, but the pharmacy withholds that information and tells them that the drug isn’t covered or that they can’t get it in their formulary (Brekke, Holmas, & Straume, 2010; J. Edwards, 2011).
2. Assembly Line Care in the Field of Mental Health
a) Assessment and Diagnosis
In mental health, the diagnostic assessment process typically takes 2-3 hours and continues throughout treatment; insurance only allows reimbursement for one, 53-minute session of diagnostic assessment, so any diagnostic assessment conducted after the initial session must be billed at the lower rate designated for therapy sessions. Providers are either forced to cram a 2-3-hour assessment process into 53 minutes or take a financial loss and provide a complete diagnostic assessment service at a lower rate. Arguable, a provider is not going to be as effective in providing an accurate diagnosis and formulating a treatment plan within a period of time that does not follow best practices. And, it is unfair to expect a provider to conduct an assessment over the time period proscribed by best practices with the trade off of accepting a lower pay rate. Further, how does this impact the provider’s feelings toward the client and the therapeutic alliance? Does the therapist feel some twinges of resentment about being undervalued by both the insurance company and the client?
b) The Western Medical Model: How it Influences Insurance Policies and Ultimately, Patient Care
As with physical medicine, in mental health, not only is assessment abbreviated, other treatment practices are dictated by insurance company policy, not best practices. Psychology also uses the Western Medical Model to diagnose and treat mental health concerns at the pathogenic level, which is necessary to receive reimbursement from insurance. Under this model, mental health disorder is made up of a constellation of expressed symptoms. Practically speaking, this means that providers must pathologize a survivor’s experience of abuse, neglect or other trauma by labeling the individual as “disordered” (Hari, 2018). And as with Western physical medicine, many mental health interventions are designed to treat symptoms of disorder, not necessarily the underlying problem, so the actual problem often goes untreated. For example, with a specific phobia, like arachnophobia, the presenting problem is a fear of spiders. The Western approach would be to utilize a cognitive behavioral protocol designed to address the fear of spiders and the other symptoms that go along with that (e.g., panic attacks, avoidance). However, as with physical conditions, the presenting problem is not usually the underlying problem. A fear of spiders is what we call a “safe fear”; it’s a controllable, concrete, external manifestation of a deeper problem, usually abuse, neglect or another trauma. The deeper problem is too terrifying to address, so the mind finds elaborate ways to manage the fear by displacing it on an object or creature such as a spider. Psychotherapy can certainly address the underlying problem, but the insurance system views these issues according to the Western Medical Model (disease-state model), and diagnosis, treatment and reimbursement have been tailored accordingly. Practically speaking, this means that a provider must diagnose and treat a “mental health disorder”, even if it is clear the person’s symptoms result from abuse, neglect, or other trauma (the actual problem), otherwise the insurance system will not cover treatment.
Frequency and duration of therapy, length of sessions, type of treatment, and not just diagnosis of problem as disordered, but allowable disorder diagnoses for treatment length are all dictated by what the insurance company will cover. Some insurance plans allow for more than one session per week and some allow only one. And, even if a client buys coverage with unlimited mental health sessions, allowing for increased therapy frequency and duration, there are loopholes that prevent this coverage from being truly unlimited; for example, requiring regular, written reports from the provider about client “progress” to determine if treatment continues to be “medically necessary”. Treatment of underlying problems like trauma, rather than treatment of expressed “disorder” symptoms, require more time and deep, complex interventions that do not fit with the brief, disease-state treatment models insurance companies proclaim are sufficient.
Some insurance companies will not reimburse for the standard, 53-minute therapy hour, and will only allow 38-minute sessions. For other companies, a 53-minute session is covered if a client has a certain diagnosis. This means that in order for a client to get the standard therapy hour, their provider needs to diagnose them with a condition that the insurance company has decided is severe enough to warrant a standard therapy hour. If they do not meet criteria for such a diagnosis, they cannot receive a standard hour of therapy. In some cases, the insurance contract has clauses potentially allowing longer treatment durations or session lengths, if the provider wants to complete a prior authorization. But, this is extra, unpaid work that’s placed on the provider and there is no guarantee that the prior authorization will be approved.
In response to health insurance’s “managed care” restraints on treatment, researchers began to develop briefer, symptom-focused treatment protocols to provide clients with some level of relief. Although these protocols have their merits and are helpful to alleviate distress in clients, they are not sufficient for many conditions and do not always address the underlying problem. This is by no fault of the treatment protocol; the treatment protocols are not designed to address the underlying problem, they are designed to address the symptomatology of an expressed disease state, just like most Western medical interventions. Curiously, even when providers utilize these protocols, developed to address insurance’s managed care constraints on mental health treatment, the insurance companies place further constraints on care. These “gold-standard treatment protocols” that researchers have developed and tested in clinical trial research, assume a standard 53-minute session, and as I discussed, not all insurance companies allow standard sessions. And some protocols, like Prolonged Exposure Therapy for Posttraumatic Stress Disorder (PTSD), which actually is designed to address the underlying problem (i.e., a traumatic event), rather than symptom presentation, require 90-minute sessions, which are not covered by insurance. The sessions lengths allowed by the insurance companies, fall short of what’s required by the “gold-standard treatment protocols”, developed through rigorous clinical trials, and providers are not able to provide clients with the best care available.
Furthermore, a source revealed to me that insurance companies believe that therapists are taking too long with clients and should be billing the minimum time necessary for procedures, like physicians do. More specifically, they believe that therapists should never need to see clients for a full, 53-minute session, and should only rarely see clients for ¾-length sessions (i.e., 38-52 minutes). Furthermore, the full to ¾-length sessions are viewed by the insurance companies as “extended” sessions and should only be necessary for the first few sessions. After that, sessions should never be longer than 16-37 minutes; following more of a maintenance model, and adhering to the minimum-time-necessary billing standard that physicians use. In my experience, the less than 15-minute consultation session I get with a medical doctor is not enough time to gather enough information for an accurate diagnosis and get my questions answered. For mental healthcare, designed to be a deep, introspective process, requiring high levels of self-disclosure and trust, a 16-minute session is an abomination. Not to mention the fact that it is around ¼ of the standard therapy session, 44 minutes shy of what is recommended by treatment protocols. So, even after attempts to adapt to insurance’s managed care constraints by developing and utilizing brief, symptom-targeting protocols, providers are literally not able to provide individual clients with the best level of individualized care; insurance companies control the type, amount, and frequency of treatment consumers are given.
C. A Rigged System
As mentioned earlier, the goal of health insurance is to take in more in premiums from consumers than they pay out in claims; in other words, the goal is to minimize their “medical loss ratio”. This is how they make a profit. It’s not fair to fault a business for trying to making a profit, but what also isn’t fair is that many people are under the impression that the health insurance system is fair and is designed to help them. This is a fallacy. Your insurance company cannot make money and ensure that you get your “money’s worth” out of your health insurance policy; these are diametrical goals. Consumers need to understand this. And providers need to understand this too because the implication for providers is that their employer’s goal is to pay them as little as possible. Indeed, in a Kentucky Supreme Court Case, Judge Osborne said, "Ambiguity and incomprehensibility seem to be the favorite tools of the insurance trade in drafting policies. It seems that insurers generally are attempting to convince the customer when selling the policy that everything is covered and convince the court when a claim is made that nothing is covered. The miracle of it all is that the English language can be subjected to such abuse and still remain an instrument of communication" (Osborne, 1970). Further, insurance companies utilize software programs nicknamed “denial engines” to go through claims to find clerical errors so they can increase the rate of legitimately rejected claims (McKennon Law Group PC, 2017). What’s more, a source informed me that the highest rates of claims denials were for mental health services and cancer treatment. I don’t want to jump to any conclusions about why these particular types of claims might have the highest denial rates, but I certainly have some ideas about this, and those of you reading this probably do too. Perhaps high expense to treat (high medical loss ratio) and limited ability of these populations to fight the claims denials might have something to do with this? I believe John Grisham wrote a “fictional” novel addressing these hypotheses.
This source’s information is not an aberration. In 2014, CBS’s 60-Minutes aired an exposé on mental health claim denials by health insurance companies. They found that the 11 doctors contracted by Anthem to review mental health claims had a denial rate averaging 90%; this denial rate persisted even when treating providers pleaded with the insurance claim reviewers to authorize additional care because of medical necessity. Following premature termination by the insurance company of provider-recommended mental health care, some of these patients died from causes linked to their conditions (Pelley, 2014). Disconcertingly, denials of such high-risk patients are common. Almost a quarter of all patients with chronic or persistent illnesses experience claims denials; and of these individuals, when their illness rose to the category of “serious”, the denial rate rose to 70%. What’s more, the rate of claim appeal is very low; data is scant but one piece of evidence suggests that 0.5% of denied claims are appealed. However, the reversal rate of denials is high, 40% on average (Government Accountability Office, 2011), leading some, such as McKennon Law Group PC, to state: “ This means health insurers routinely make the wrong decision and hope that their insureds do not pursue these claim denials…” (McKennon Law Group PC, 2017). Consumers are purchasing a third-party service to cover their medical expenses and those consumers who need it most aren’t allowed to reap the benefits of a service they paid for in good faith. How are mental health and medical providers supposed to provide treatment when the system is rigged? And, knowing this, why do we want to participate in a system where we and our clients are set up to lose?
II. Sustainability of the Current Third-Party Payer System: Financial and Inter/Intrapersonal Concerns
A. If Healthcare is More Expensive with Insurance, Why Do Consumers Buy Insurance?
1. The Power of Fear
Not only does health insurance offer a poor ROI and discourages best medical practices, I would argue that it actually makes healthcare more expensive. Healthcare is generally more expensive because the healthcare system is set up to be supported by the health insurance industry. When health insurance supports the healthcare system, consumers must pay the overhead of three entities, their doctor, their insurance company, and the billing person their doctor pays to navigate the convoluted claims process in order to receive payment from a third party. Business economics 101 would tell most of us that the best way to cut costs would be to cut out the middle man (health insurance industry). So, why do consumers buy their product if, logically, it’s such a terrible investment and it increases the costs of healthcare? Why do humans do lots of irrational things? Fear. Fear, and the invisible power of the status quo. Everyone is afraid that they will have a $100,000 or $1,000,000 health problem, they won’t be able to afford treatment, will die or bankrupt their family. That fear is valid. No one wants to die because they cannot afford medical treatment and no one wants to bankrupt their family. The problem is, in those instances in which consumers need a $100,000 or $1,000,000 medical treatment, there is still no guarantee that it will be covered by insurance. In fact, as discussed above, those with “serious” illness had very high claim denial rates, and many delayed or even forwent treatment because insurance denied their claims (Schoen, 2017). Further, many insurance plans have caps on medical expenses, usually around $1,000,000, so if and when consumers reach this amount, they lose coverage. If, rather than purchasing health insurance, consumers budgeted for health expenses each year and put that money into a savings account or a conservative mutual fund, they would end up with enough to cover that unexpected and highly unlikely medical expense (e.g., if consumers put $4000 into a mutual fund with a 10% growth rate, from ages 25-65, they would have almost 2 million dollars at age 65), rather than literally throwing that money away each year on an insurance plan that is set up to take in more than it pays out.
2. The Power of the Status Quo
The power of the status quo also explains why consumers continue to engage in the irrational behavior of buying healthcare at a financial loss via insurance. Consumers overlook the status quo because it is omnipresent and entrenched, essentially rendering it invisible. In order to make the invisible, visible, it needs to occur to consumers that there is something important to see and there needs to be a reason to look. Hopefully, this article has already established that there is something to see. So now the question is, “Why?” Why do consumers buy health insurance? Because it is financially beneficial? Because it allows consumers the best level of medical care? The previous arguments have established that neither of those conditions are true. So, why do consumers purchase and carry health insurance? Consumers carry health insurance because they are afraid, and also because that is what is done, what everyone does, and what everyone is supposed to do in order to receive healthcare (i.e., the status quo). Just because carrying health insurance is what is done, what everyone does, and what you are supposed to do doesn’t mean that it must be so or that it is a good idea. I think it is pretty clear that purchasing health insurance is not financially beneficial, but people’s fears and the momentum of the status quo are strong. Most consumers don’t seek to question how or why things are done, and if they do, they are often met with disapproval, “Why would you do that? That’s not what people do!” Such is the nature of challenging the status quo. Even if the status quo is successfully challenged, the next step is figuring out what to do instead, how to fill the vacuum left by the status quo. This is where many get stuck, if they’ve made it this far, and then begin retreating back to the status quo: “How am I going to go to the doctor if I don’t have health insurance? This is how things are done. I don’t know what to do instead.” The answer seems so simple, yet it is striking how many consumers cannot fathom an answer to this question: Pay for medical expenses directly with the money you would use to purchase an insurance plan and start a savings/investment account to cover future medical expenses. Consumers will save a small fortune using this approach. In fact, some doctors actually offer a discount to people paying with cash because they don’t have to pay a billing person to process the claim, cover insurance claim losses for other patients, cover the overhead of the insurance company, or cover the overhead of a large hospital (H. S. Edwards, 2017)
B. Health Insurance Facilitates the Undervaluing and Unsustainability of Mental Healthcare
Now, I discussed the fact that healthcare is generally more expensive because of the insurance industry. There is one segment of healthcare that is disproportionally inexpensive: mental healthcare. To those who are not mental health providers, this might come as welcome news, especially given the mental health crisis we have in this country—“Yay! Mental healthcare is affordable! Problem solved!” I would argue that the undervalued nature of mental healthcare actually contributes to the crisis. Our current, insurance-driven Western Medical Model of mental healthcare 1) is undervalued and financially unsustainable, and, 2) as discussed earlier, has turned mental healthcare into a business not healthcare.
Mental healthcare is undervalued and according to basic social psychology, we have a cognitive bias that says expensive = good/valuable and inexpensive = bad/not valuable (Cialdini, 2009); according to this bias, low reimbursement rates would lead people to believe that mental healthcare is not a valuable service. This conveys the message that mental health is not as valuable as physical health or even most people’s monthly car payment. The system is financially unsustainable because providers are paid poorly for the work they do, the annual salary per years of education is astonishingly low, there is a large discrepancy in pay for identical services between medical providers and therapists, the overhead is high compared to reimbursement, costs of training are high, many of the hours of required work are not reimbursed, there is no guarantee of payment or timely payment, and insurance contracts are limited.
1. Mental Health Providers are Paid Poorly Compared to Other Professionals
a) M.D. versus Ph.D. Salary
Table 1 (below) highlights salaries across several professions. These are salaried positions, so they are not directly tied to insurance reimbursements, but I include these to illustrate the incredibly low pay rate for mental health professionals compared to other professionals. Later, I will discuss the insurance reimbursement rates for mental health, factoring in overhead; these rates are much lower than the median salary listed for a Ph.D.-level psychologist, and ultimately, are lower than the pay rates for every other profession listed in Table 1.
Let’s take a look at what certain professionals are paid and let’s consider whether mental health providers’ wages are fair. According to PayScale.com, doctoral-level psychologists make an average of $74,000 per year and masters-level therapists make an average of $43,000 per year. By comparison, psychiatrists, make an average of $195,000 per year. Physicians in the lowest paid medical specialty, family medicine, make an average of $175,000 per year (PayScale). The table also highlights required years of education to practice in each field (Rubin, 2010). As illustrated, doctoral-level psychologists are required to complete one year less training than a family physician and make only 2/5 of the salary that a family physician makes (Study.com). That is a major discrepancy for only one year of training.
b) M.D. versus Ph.D.: Discrepancy in Reimbursement for the Same Service
Further highlighting the discrepancy in pay between physical medicine and mental health is a direct comparison of reimbursement rates between M.D.s and mental health providers for the same mental health service. When billing for the same service, physicians are reimbursed 50% more by the insurance companies than therapists (Gold, 2017). This is very surprising given the fact that the same service is performed. And it is especially surprising and dare I say, disconcerting, that the individual with the highest level of training in a given service area (the therapist) is paid 50% less than the individual with virtually no training in a given service area (the physician). If we look at the inverse, therapists providing medical services, such as medication management, in which therapists have very little training, just as a medical doctor has very little training in providing therapy, therapists are prohibited from performing the service at all, and will most definitely not receive reimbursement for providing the service.
c) Therapist versus Life Coach: Discrepancy in Salary for Similar Services
I didn’t include life coaches’ salaries in the table below, but I think it’s important to note the discrepancy in salary here, given that they provide similar services. By definition, “life coaching is the process of helping people identify and achieve personal goals. Although life coaches may have studied counseling psychology or related subjects, a life coach does not act as a therapist, counselor, or health care provider, and psychological intervention lies outside the scope of life coaching” (Wikipedia). In other words, therapists provide the same service as coaches and much more; therapists have received required, specialized training in human behavior and therapeutic interventions. If logic drove the world, I would conclude that therapists must receive a much higher salary than coaches, given their level of training, the liability involved with their jobs, and the breadth and depth of the services they are able to provide. As it is, logic does not drive the world. In a brief search of coaching services in the Twin Cities metro area, I found that coaches may or may not have advanced degrees, offered similar services to therapists (with the exception that therapists provide a breadth and depth of service that coaches are unable to provide), and charged between $200-667 per session hour for their services (Burza; Marver; Stimpson). By comparison, as I will discuss below, most insurance companies will reimburse no more than $130 per hour for a Ph.D.-level therapist. Therapy rates ranging from $200-667 per session hour are virtually nonexistent, even in the private-pay sector.
Initially, this discovery made me feel very resentful toward life coaches, the insurance companies, and society for undervaluing our profession. After tracking down the source of my resentment and seeking to understand it, I realized that there’s no need to use my energy on resentment, rather, there’s some very valuable information in this discrepancy (McLain, 2018). Specifically, people do value the services therapist provide and are willing to pay a healthy, out-of-pocket rate for them. The mental health field can learn from life coaches about how to market services and advocate for better rates of pay.
d) Discrepancies in Salary Between Mental Health and Other Professionals
Individuals in other professions with equivalent or fewer years required training than that required for doctoral-level or masters-level mental health professionals make substantially higher salaries, such medical doctors (as discussed above), attorneys, and investment bankers. If we look at only masters-level therapists, every profession listed, with the exception of a dog trainer, makes a higher or equivalent salary, and even a dog trainer doesn’t make much less than a therapist. And, when we look at insurance-based salaries, every profession listed makes more than a masters- and doctoral-level therapist. To better compare education level by salary, I’ve included a figure for annual salary per years of education. It is commonly thought that higher education increases overall salary, and appears to be financially advantageous over time, but in the one-year snapshots highlighted in this table, annual salary per years of education does not appear to be a good investment of time or money. This is most notable for graduate degrees in mental health, and especially for masters-level therapists, who make similar or lower salaries than those with similar or fewer years of higher education, such as attorneys, investment bankers, insurance brokers, commercial truck drivers, machinists, and psychics (How to Become; PayScale; Study.com).
Let me highlight one discrepancy in particular: The person who sells consumers their insurance policy makes more than their masters-level therapist and makes only 14,000 less than their doctoral-level therapist, despite their therapist’s 7-10 additional years of training (Study.com); and if we consider salaries of therapists credentialed with insurance (discussed later), the insurance broker makes much more than both masters-level and doctoral-level therapists. Does anyone see something wrong with that? Consumers are paying the person they buy their insurance policy from more than they are paying their actual provider. It certainly speaks to where the bulk of the consumer’s investment in their insurance plan goes (i.e., to the costs of administering the plan, not in paying for actual medical services). In my opinion, the truth of these discrepancies is insulting, marginalizing, and sad for the field of mental health. I think these discrepancies reflect the values of our society. We place more value on manufacturing a widget, how fast our money can grow, moving our consumer goods across the country, and almost as much value on the training of our pets than we do on our well-being. I suppose this is evident from the tenor of our country’s spirit, but despite our despondency, we have failed to fully see and address this discrepancy. Logically speaking, how happy is a society going to be who places consumerism over well-being?
2. Mental Health Provider Salary Under the Insurance Reimbursement Model
Not only are the salary discrepancies between mental health professions and other professions disconcerting, the numbers I’ve discussed aren’t the full picture. The mental health salaries I’ve listed above are median salaries and are not the actual salaries for a therapist in private practice, accepting insurance. So, the numbers above include therapists who work for agencies, the VA system, for corporations, universities, et cetera; the pay rates among these sectors varies significantly.
a) Substantial Salary Reductions Over Time
One thing you might like to know before I discuss current insurance reimbursement rates, is that reimbursement rates for therapists used to be much higher than $130 per session (which is at the higher end of the reimbursement spectrum), even without adjusting for inflation. Twenty-four years ago, Ph.D.-level therapists received insurance reimbursements that were higher than the current, $130/session, receiving reimbursements from that same insurer of $150/session, which is the equivalent of $253/session in 2018 dollars ("U.S. Inflation Calculator,"). With deregulation of healthcare and the transition to managed care, managing the costs of physical and mental healthcare, the reimbursement rates have dropped substantially. So, how can insurance companies get by with reducing reimbursement rates by 51% without anyone noticing or complaining? A combination of factors such as not adjusting for inflation, making small rate decreases over time, and the naïveté of new generations of therapists, unfamiliar with the old ways (and reimbursement rates), have made the reductions nearly invisible; furthermore, mental health providers do not have any representation to advocate for fair wages, such as physicians do with the American Medical Association (Powers, 2018). Another factor, that could take up an entire article, is that the field of psychology has transitioned from being a male-dominated field to a female-dominated field, which is not the case for physical medicine; physical medicine continues to be male dominated (Kaiser Family Foundation, 2018). In 1970, around 30% of all Ph.D.’s in psychology were awarded to women; in 2008, over 70% were awarded to women (Willyard, 2011). And, from 2005 to 2013, the number of active female psychologists in the workforce rose 10%, from 58% to 68% (APA Center for Workforce Studies, 2015), which is a fairly rapid shift. The gender disparity in salary in this country is undeniable (Miller, 2016). The shift to a female majority in the field of psychology over time may help explain the shift (decrease) in reimbursement rates over time.
b) The Financial Realities of Reimbursement Rates
(1) Realistic Client Contact Hours per Week, Vacation Time, and Overhead
When we first glance at reimbursement rates for insurance credentialed providers, the rates might not seem too bad: Insurance companies A, B and C pay $130 per 53-minute session whereas insurance companies D, E and F pay $94 per 53-minute session for a doctoral-level psychologist. So, at first glance, it would appear that mental health providers are making $94-$130 per hour and at 40 hours per week, that’s a pretty great salary: $195,000 to $270,000 per year. Unfortunately, those numbers do not reflect reality. Therapists cannot provide 40 hours of therapy per week, provide a high level of care, and have time to take care of themselves. Therapists also cannot work 52 weeks per year, provide a high level of care, and take care of themselves. Further, the $195,000 to $270,000 annual salary does not include overhead.
The annual salary of an insurance credentialed provider looks much different if we take a more realistic view of the number of clients a therapist can see each week, the number of weeks of vacation a therapist takes each year, and the overhead involved with running a small medical practice, which is a complex figure to accurately compute. Depending on the type of therapy a therapist does, the types of clients a therapist sees, the therapist’s level of experience, the amount of internal process work a therapist has done, a therapist’s sensitivity and attunement level, and how much a therapist believes in role modeling boundaries and self-care in their business, most therapists see between 10-20 clients per week; some see as many as 25, but that is usually the upper limit. And, I suspect that many therapists may want to see fewer clients than they actually see but feel that they need to see more clients because of financial constraints, social comparison, and some beliefs about martyrdom.
In addition to number of clients seen each week, vacation time must be subtracted from the equation. The American standard for vacation time is two weeks per year. I don’t think that two weeks is healthy for any American and would argue that therapists need to take substantially more vacation time than the average American if they want to prevent burnout and provide a high level of care to their clients. I believe that therapists should take a minimum of six weeks of vacation time each year and preferably even more than that; Casey Truffo recommends eight weeks (Truffo, 2007). (I personally take 12 weeks each year and have noticed a reduction in burnout and increase in my ability to provide quality care.)
After computing number of clients seen each week and weeks of vacation per year, we need to compute basic overhead. My basic overhead, per therapy hour, per week is around $40; I’ve heard other therapists quote a similar number, but I would encourage the therapists reading this to calculate their individual overhead figure. Basic overhead includes costs such as rent, transportation, office supplies, therapy materials, phone, website, advertising, billing, malpractice insurance, licensing, continuing education, personal therapy, consultation (e.g., business, client, legal), networking, etc. As I mentioned, overhead is a complex number. I’ll first discuss estimated salary with basic overhead, then I’ll discuss aspects of overhead that are often overlooked.
(2) Wide Variability in Salary, Independent of Therapist Efficacy and Effort Level
We’ll look at two therapists, both with doctoral degrees, in different scenarios in order to get a better picture of the salary range. Therapist B is credentialed only with insurance company F, makes $94 per session, sees 10 clients per week, works 46 weeks per year, and pays $40 in overhead per session, per week. Therapist B’s actual reimbursement rate per session is $94-40 = $54 per session. At a rate of 10 clients per week and 46 weeks per year, Therapist B’s annual salary is $24,840 per year. Therapist A was able to get a contract with one of the best health insurance companies in the state, so Therapist A receives $130 per session. Therapist A sees more clients per week, 20, and works 46 weeks per year, and pays $40 in overhead per session, per week. Therapist A’s actual reimbursement rate per session is $130-$40 = $90 per session. At a rate of 20 clients per week and 46 weeks per year, Therapist A’s annual salary is $82,000 per year. That’s not too bad.
Pay rates vary widely, and somewhat arbitrarily, depending on whether insurance companies with higher reimbursement rates and higher enrollment numbers are offering contracts in a particular area; this variability is not tied to treatment complexity, therapist effort level, or therapist efficacy. Let’s consider treatment complexity, which is tied to effort level, using the hypothetical therapists from above. Therapist A lives in an area where Insurance Company A is offering new contracts at a $130 rate; Therapist A’s treatment specialty is personal growth; she utilizes a surface-level, goals-based treatment process, and her clients tend to be very high functioning individuals, diagnosed with Adjustment Disorder, Unspecified. She is able to see 20 clients per week. Therapist B lives in an area where only Insurance Company F was offering new contracts at a $94 rate. Therapist B’s treatment specialty is trauma treatment; she utilizes a deep, internal processing approach with clients that is effective but intense and emotionally draining for her and her clients. Her clients are typically diagnosed with Posttraumatic Stress Disorder (PTSD) and Major Depressive Disorder (MDD). Because of the intense work she does with a high-risk population, Therapist B is only able to see 10 clients per week, while still ensuring a high level of client care and time for personal care. Both therapists are great at what they do, but for reasons completely unrelated to their efficacy, treatment complexity, and effort level, Therapist A makes much more than Therapist B. In fact, Therapist B can’t even pay her bills.
(3) Often Overlooked Aspects of Overhead
Now for the aspects of overhead that are often overlooked: healthcare, retirement, self-employment tax, and student loan debt. Despite the fact that Therapists A and B technically work for the health insurance companies, because they are contract employees, they don’t receive any of the benefits that go along with the drawbacks of employment by a large company, like health insurance or retirement. So, both therapists have to buy their individual health insurance on the open market. If we assume that both therapists are healthy, nonsmoking women in their mid-thirties, and are only buying individuals plans, they can expect costs ranging from $3277 to $4784 (only covering premium with no attempt to use the policy to pay for healthcare) to $9,877 to $12,134 (cost of premium plus attempts to use the policy to pay for healthcare via deductible) per year (Health Partners Insurance). After paying for health insurance, Therapist A (initial salary of $82,000) is bringing home between $78,723 and $69,866 (depending on whether she actually used the insurance coverage or not), with an average of $74,295; Therapist B (initial salary $24,840) is bringing home between $21,563 and $12,706, with an average of $17,135.
Typical retirement contributions by employers use a match system of 50 cents per employee dollar contribution up to 6% of employee’s salary (Brandon, 2010). The insurance companies’ contract employees are not eligible for an employer match, so we need to determine not only out-of-pocket retirement costs, but also the employer match amount as lost salary. If Therapist A makes $82,000 per year, and contributes 6% of her salary, that would be $4,920; the missing employer match is $2,460. In order to be on pace with her non-contract employed peers, Therapist A would need to budget a $4,920 personal contribution plus the $2,460 missing employer match; a total of $7,380. If Therapist B makes $24,840 per year, and contributes 6% of her salary, that would be $1,490; the missing employer match is $745. In order to be on pace with their non-contract employed peers, Therapist B would need to budget a $1,490 personal contribution plus the $745 missing employer match; a total of $2,235.
How much are Therapist A and Therapist B making after paying for their health insurance and retirement benefits out of pocket? If we take Therapists A and B’s average salaries after paying for insurance coverage, $74,295 and $17,135, respectively, and subtract retirement contributions, $7,380 and $2,235, respectively, we get a salary of $74,295-$7,380 = $66,915 for Therapist A and $17,135-$2,235 = $14,899 for Therapist B.
(c) Self-Employment Tax
In addition to regular income taxes, self-employed individuals have to pay self-employment tax. The self-employment tax rate is 15.3%, which covers Medicare and Social Security. For traditional, non-contract employees, the Social Security and Medicare tax rate is 6.2% for each individual and 6.2% for each employer (Internal Revenue Service; Internal Revenue Service). Again, despite the fact that Therapists A and B are technically employed by the health insurance companies, they are contract employees, so the insurance companies do not pay part of the tax; Therapists A and B have to pay the entire amount. After paying for insurance and making a retirement contribution, Therapist A has only $66,915 remaining annual salary and Therapist B has $14,899. Self-employment tax contributions for Therapist A and Therapist B are $10,238 and $2,280, respectively, leaving therapist A with a salary of $56,677 and Therapist B with a salary of $12,619. If the therapists had been actual employees of the insurance companies, they would have reduced their tax rate by 9.1%, which is a savings of $6,089 for Therapist A and $1,355 for Therapist B.
(d) Student Loan Debt
Another aspect of overhead that’s often overlooked in overhead calculations is student loan debt. Therapists A and B both have Ph.D.’s which means they paid for at least 10 years of formal education and training (including their postdoctoral residency). The amount of student loan debt depends on type of graduate program attended, scholarships, outside assistance, etc., but few individuals with graduate-level training can escape student loan debt. Just as any other small business would include conferences, continuing education, and trainings in their overhead, mental health private providers should include their most essential training cost, their degree, in their practice’s overhead. Right now, therapists in private practice have some options for loan repayment, including making full payments or applying for an income-based reduced payment. Making a full payment is exactly what it sounds like, after loans come out of deferment, individuals follow the payment amount and schedule the lending company prescribes. The second option, an income-based reduced payment, uses a formula based upon income to determine the payment amount an individual can afford. At the end of 25 years, the remaining amount of the loan is discharged as income, not forgiven (as many people believe). In other words, individuals utilizing the income-based repayment plan will need to pay taxes on the remainder of the loan amount, and if they were only able to make small payments because their income was not commensurate with the amount of training and student loan debt they acquired, that loan amount will have grown astronomically. Let’s apply the two scenarios, making regular payments and utilizing an income-based repayment plan, to our hypothetical therapists (See Table 2).
As I mentioned, both Therapists A and B have doctoral degrees, both received scholarships, but with personal expenses and school expenses over the course of earning their degrees, they ended up with $205,000 in student loan debt. (Note: If credit cards or personal loans were used to cover expenses during school and/or the lean times in a new private practice, please include that debt in overhead calculations; that is considered part of training/business expenses.) After Therapists A and B paid for health insurance, retirement and self-employment tax, Therapist A is left with $56,677 annually and Therapist B with $12,619 annually.
In Scenario 1, the therapists make payments according to the amount and schedule prescribed by the lending company, which is $2,245 per month, or $26,940 annually, until the loan is paid off (approximately 10 years). After making required payments, Therapist A is left with $29,737 annually and Therapist B is left with -$14,321 annually.
In Scenario 2, the therapists make income-based payments and at the end of 25 years, the balance is discharged as income. Therapist A’s income-based payment is $404 per month ($4,848 annually); after making this payment, Therapist A’s annual income is $51,829. At the end of 25 years, the remaining balance to be discharged is $304,307 and according to the tax calculator, Therapist A will pay $89,438 in taxes on that amount. If anyone is wondering which scenario is most fiscally advantageous, it’s Scenario 1, making the full payments each month. If Therapist A picks this option, Therapist A will pay a total of $273,890 on the original loan of $205,000; if therapist A picks Scenario 2, the income-based repayment plan, Therapist A will make $208,876 in payments plus will pay the income tax of $89,438 for a total payment of $298,314 on a $205,000 loan; that’s a savings of $24,424, utilizing Scenario 1. (If the total numbers seem off, it’s because the repayment plan considers income growth in the algorithm and I didn’t go into detail about that here.)
In Scenario 2 with Therapist B, her income-based payment is $0 per month because her income is so low; as such, her annual income remains at $12,619. At the end of 25 years, the remaining balance to be discharged is $512,500 and according to the tax calculator, Therapist B will pay $181,339 in taxes on that amount. If anyone is wondering which option is most fiscally advantageous for Therapist B, it’s Scenario 2, taking the income-based repayment plan. If Therapist B picks this option, Therapist B will pay a total of $181,339 on the original loan of $205,000; if Therapist B picks Scenario 1, the payment plan prescribed by the lending company, Therapist B will make $273,890 in payments on the original loan of $205,000. Scenario 2 ($273,890) - Scenario 1 ($181,339) = $92,551 savings; further Scenario 2 offers a $23,661 savings on the original loan ($205,000-$181,339; (Kirkham, 2017; Smart Asset).
Table 1 provided a metric for comparing the value of higher education (i.e., salary per years of education) and highlighted the low monetary value of education in the field of mental health. What Table 1 didn’t highlight was the amount of debt that accumulates with each year of education. So, not only do mental health providers spend employable years of their life not working so they can receive training and are paid poorly when they graduate, mental health providers incur significant levels of debt during that time. The discussion above highlights the practical impact of this training debt. I hope that the discussion made it clear that someone with 10 years of education and a significant amount of student loan debt cannot afford to accept the reimbursement rates offered by the insurance companies. A salary ranging from -$14,321 to $29,737 is not practical to afford basic life expenses and is completely unacceptable for someone with 10 years of higher education. We all need to ask for more. We certainly deserve a better salary than -$14,321 to $29,737. I mean, seriously, there’s a negative number in this salary range! What are we doing to ourselves?
(e) Unbillable Hours
A final often overlooked aspect of overhead is unbillable hours. It’s important to note that the number of client hours billed per week does not reflect the actual number of hours worked per week. If therapists are credentialed with insurance, they can estimate that they will spend an additional 30 minutes per client, per week on various activities associated with insurance (e.g., credentialing, contracting, paperwork to authorize additional sessions, going through EOBs to make sure sessions were reimbursed, determining client portion of payment and collecting payment from clients, calling the insurance companies to discuss discrepancies, being upset about how much additional work they need to do to get paid, etc.). Therapists are probably spending at least another 30-60 minutes per client, per week, on unpaid activities associated with their practice (e.g., session preparation, notes, scheduling, marketing, networking, referrals, consultation, training, internal process work, etc.). Using these numbers, therapists who accept insurance spend 60-90 minutes, per client, per week, outside of session on client-related activities. Taken together, these therapists are spending between 2 and 2.5 total hours per client, per week on practice-related activities, or 20-50 hours per week total, depending upon if the therapist sees 10 or 20 clients per week. This time doesn’t include the self-care time essential for recharging to show up fully for work with clients. I will discuss that later.
To reiterate, providers who accept insurance spend 5-10 hours each week (depending on client load), above and beyond their regular duties, just dealing with the insurance process. That is time that is given away: your precious time, for free! Let’s look at what the reimbursement rates look like after paying basic overhead and after factoring in the unbillable time required to accept insurance. Insurance company A reimburses at $130 per billable hour and Insurance Company F reimburses at $94 per billable hour; each company requires .5 unbillable hours per billable hour, for a total of 1.5 hours of required work, billable and unbillable; overhead is $40 per billable hour. That means that the hourly rate for Insurance Company A is $130-$40=$90 divided by 1.5 total hours; that number is $60 per hour. The hourly rate for Insurance Company F is $94-$40=$54, divided by 1.5 total hours; that number is $36 per hour. The actual reimbursement rates are much lower than they appear in the contract you sign each year, and although Insurance Company A’s rate still doesn’t look that bad; Insurance Company F’s rate of $36 per hour is pretty low. And, wouldn’t it be nice if your contract reflected your actual hourly rate of reimbursement? I think that’s called full disclosure.
If we take this a step further and enter in the total time spent on insurance-, practice- and client-related activities per week, which is 2-2.5 hours per client, the numbers are much lower. The hourly rate under contract with Insurance Company A is $130-$40=$90 divided by 2.5-2 total hours, which is $36-$45 per hour. The hourly rate under contract with Insurance Company F is $130-$40=$54 divided by 2.5-2 total hours, which is $21.60-$27 per hour. Furthermore, I’ve chosen to present these numbers with only the basic overhead and haven’t included the other factors such as number of billable hours that are practical in a week, vacation time, or the often overlooked aspects of overhead such as benefits, self-employment tax, and student loan debt. So, make no mistake, therapists are not actually making the $21.60-$45 hourly rate I used for illustrative purposes here.
c) Additional Considerations
(1) No Guarantee of Payment or Timely Payment
Not only does accepting insurance require an additional 30 minutes per client per week, there is no guarantee that a provider will ever be paid by the insurance company, and most certainly, the provider will not be paid in a timely manner. For those of us familiar with the process, claims are typically processed and paid out within 1-4 months and sometimes are never paid, despite significant time and effort to receive reimbursement. I don’t know a single provider who has been paid for 100% of the legitimate claims they’ve filed. There are many reasons given by the insurance companies for these delays in payment and nonpayment of claims: the claim wasn’t received, the claim wasn’t received on time (even if it actually was submitted on time), there was some sort of error in processing the claim, there was a problem with their system, the diagnosis isn’t sufficient for that service, inaccurate coding by doctor, incomplete or inaccurate insurance information, lack of prior authorization or referral, the client’s specific insurance policy does not cover a 53-minutes session, it only covers a 38-minute session (after the provider has already provided a 53-minute session), the insurance company needs proof that the service is medically necessary, (McKennon Law Group PC, 2017), or my favorite, the claim was approved but the insurance company “forgot” to issue a payment. It would almost seem as if the system was set up to find ways to not pay claims (see section “A Rigged System” and its description of “denial engines”).
How many people would stay at a job where their boss didn’t pay for a full 1/3 of their working time (i.e., 60 minutes in session, 30 minutes out of session to bill)? How many people would stay at a job where requests to receive their paychecks are frequently denied? How many people would stay at a job where it could take 1-4 months to get a paycheck? Who would agree to learn and follow a complex billing rubric, with hundreds of variations, that can constantly change? Should someone with a doctoral or master’s degree put up with all of this for compensation between -$14,321 to $29,737 per year?
(2) Contracts are Limited and Consumers May Switch Carriers at a Moment’s Notice
Another caveat is that, in some metro areas, such as the Twin Cities and Duluth, Minnesota, some of the most popular insurance companies (i.e., those with high enrollment numbers) with the best rates are not offering any new contracts. Any therapists who decide to make the leap into private practice will not be able to get credentialed at the higher, $130 rate or will have to join a group practice in order to credential with those companies, which usually involves a much higher rate of overhead. There may be other insurance companies offering the higher, $130 rate, but they don’t have the same enrollment numbers, so it is more difficult to get new clients. Not to worry, Insurance Company F is almost always offering new contracts at their $94 rate, and has pretty decent enrollment, so therapists can see 20 clients per week and make between $21.60 and $27 per hour, before taxes, benefits, and student loan payments. Not bad for a Ph.D.
Finally, even if a therapist is able to get credentialed with an insurance company (or companies) with high enrollment and higher reimbursement rates, if their client switches insurance carriers, and the therapist is not credentialed with the new company, the therapist will lose that client (and that income). Or, if the therapist is credentialed with the client’s new insurance carrier, the therapist will have to accept that carrier’s rate, which could be much lower than the rate they were previously receiving. Further, if a client stays with the same carrier, but changes plans, the client may no longer be able to afford their co-pay/coinsurance/deductible and may terminate therapy, and the therapist will experience a loss of income.
C. Inter/Intrapersonal Concerns and Sustainability for Providers
1. The Consequences of Unhelpful Beliefs About Money and Martyrdom: Burnout and Devaluation of Mental Health
Unhelpful beliefs about money and helping people lead to burnout. Specifically, there’s a belief in society that people shouldn’t expect payment for good deeds, and if someone does, that is bad, and that person is also bad. Along these lines, there are beliefs that money is bad or represents greed (Truffo, 2007). Interestingly, we all need money to survive, so these beliefs create a double bind. An extension of these beliefs about money relates to therapists’ work as therapists: If therapists make their living providing good deeds to people, therapists are bad if they expect to be paid well, if at all (McLain, 2016). The problem is that this belief is not practical or even very useful. The belief actually contributes to a larger problem, martyrdom. Society loves martyrs; they are good; they died for their cause; we should all aspire to be them. The problem is, martyrdom is not sustainable, in fact, ask any martyr how martyrdom turned out for them and you’ll learn that it’s not sustainable. Putting others’ needs ahead of our own leads to all sorts of unhelpful dynamics that can be played out unconsciously, but the main issue I’m going to point out is that it leads to burnout.
Burnout is a process that starts with putting others’ needs ahead of our own, telling ourselves that we are okay with it, attempting to push down feelings of resentment, unsuccessfully pushing down/fighting off feelings of resentment, and ends with feeling embittered and exhausted. Facilitating martyrdom, resentment, embitterment, and exhaustion is the antithesis of the therapeutic process. Not only that, it’s poor role modeling for clients. In putting clients’ needs ahead of therapists’ needs, therapists create an unsustainable professional existence, not only for therapists as individuals but for the field. Credentialing with the insurance companies requires therapists to make sacrifices of their time and money, in order for others (clients) to utilize their insurance plans. Therapists are expected to work a portion of the week for free and accept a salary that is not sustainable or commensurate with their training level to benefit another person. If that isn’t martyrdom, I’m not sure what is.
Not only is the salary insufficient, it perpetuates the belief that therapy is not valuable. By accepting a rate of pay that is not sustainable or commensurate with their training level, not only are therapists martyring themselves, therapists are perpetuating the belief that therapy is not valuable. Therapy is invaluable. Therapists help heal people’s pain and change their lives. I think many therapists fail to recognize this. Most therapists feel called to this work, find that their work just comes naturally to them, and can’t imagine working in another profession, which may be why therapists don’t see the value in their work. Casey Truffo (2007) talks about this in her book, Be a Wealthy Therapist; she discusses the idea that helping people heal themselves is normal to therapists, just like drinking water, and therapists fail to see what the fuss is all about. Normalizing the value of therapeutic work is also likely why therapists don’t feel they need to be paid more, don’t see the costs involved in their work, and focus on what others need, not asking for what they need (or believing that they deserve to ask). When therapists credential with insurance companies, they don’t have the ability to ask for more, more money or more time to take care of themselves, because they are bound by the pay rates and time requirements of the insurance process.
2. Self-Care is a Necessity Not a Luxury
Therapists asking for more time and money to take care of themselves isn’t a luxury, it’s a necessity to create a sustainable individual existence and sustainable field. When therapists get home after a full day of clients, they often have nothing left to give and their work can have a detrimental impact on their personal lives. Remember Therapist B? I discussed that her specialty is in trauma and she utilizes a therapeutic orientation that requires deep, internal processing of trauma with clients; this work is exhausting and heartbreaking. Depending on her client load and the issues addressed, some days when she gets home, she can only sit on the couch and stare like a zombie. She’s not able have a conversation, make dinner, or engage with her partner or children in a meaningful way. On really tough days, she cries, is crabby, and needs a lot of emotional support from her partner; it might take her a day or two to get back to feeling like herself again. On really, really tough days, she experiences harassment, emotional abuse, boundary violations, and even feels scared for her life and safety. And she has reason to feel scared, one of her colleagues was killed by a former client. The risks she takes and the sacrifices she makes in the service of helping others are real.
It is impossible for this work not to affect therapists as individuals, no matter how great their boundaries are. This is because the therapeutic process works when therapists are able to fully engage with their clients and truly feel their experience alongside them; this process is emotionally draining. If you don’t work as a therapist, you can probably relate if you’ve ever supported a friend or family member through a painful time. The process takes an incredible amount of emotional energy and leaves you depleted. This is a huge sacrifice to make for another person. I’m not saying people should stop supporting loved ones or stop providing therapy, I’m saying that therapists need consider the value of their work and the costs they incur to their health and personal lives. And, if therapists want to continue to do their work effectively, they need to make sure they are taking care of ourselves in a way that recharges their depleted emotional energy. This also means being compensated in a way that prevents therapists from feeling resentful about the sacrifices they are making to help others, and that gives therapists the ability to take incredibly good care of themselves, in order to recharge their energy.
It might be helpful to conceptualize therapists’ work schedule and compensation rates like the work schedule and compensation rates of professional athletes. Like professional athletes, therapists’ visible work, the hours they are paid for (direct client contact hours) are a tiny proportion of the work they actually do in order to show up as therapists (Powers, 2017). Prior to starting in practice, therapists spend around a decade training to become therapists. After that, therapists spend hours each week, training to continue their work as therapists, not only doing formal consultation and training, but doing individual process work, so they can show up for their clients without letting their own issues cloud their perceptions and take up too much space in the therapy room. Therapists also spend hours each week taking time for self-care to recharge their emotional energy. Therapists need to be paid well for their time “on the field”, because the rest of their time spent working is not compensated.
The amount and type of self-care time therapists take needs to be commensurate with the amount and type of emotional output. In other words, self-care for a therapist needs to be on a different plane than self-care for the average person. By self-care “on a different plane”, I mean retreats, long, restorative weekends with best friends, trips to beautiful places, gourmet meals, massages, hours and hours spent in favorite activities without any other responsibilities, anything that is self-indulgent. These activities need not be material or expensive but they need to be restorative and about taking care of only the therapist, and not partners, kids, family members, or friends. Unfortunately, insurance reimbursement rates do not allow therapists to create a sustainable income and take the time necessary to take care of themselves. Therapists end up needing to stretch their boundaries to see as many clients as possible to earn a decent living, and doing so does not allow therapists to practice from grounded place of their needs being met and energy restored.
3. Diffusion of Responsibility
When people use an insurance plan to pay for medical or mental health services, three parties are involved in the care of one party and a diffusion of responsibility takes place. This diffusion of responsibility facilitates a fallacy that someone else is paying for the client’s services: “Insurance is covering it.” The client is ultimately paying for services via the insurance plan they’ve purchased, but the onus of responsibility rests on a third party, or appears to rest on a third party. Why does this matter? Well, when someone pays directly for a service, there is a clear, reciprocal exchange. I provide a service and you are responsible to pay me for the service. When a third party is involved, the responsibility is diluted or “diffused”. The client purchases a financial service from the insurance company, receives a healthcare service from a therapist, and the third-party financial service (insurance company) is required to pay the provider for the healthcare service that was provided to the client. Do you see how complicated that is? The client is no longer responsible to pay directly for the healthcare service they received; the financial service they hired is responsible to pay for that service.
Further complicating this exchange is the fact that the insurance contracts are incredibly complicated; most people do not understand the contracts (McKennon Law Group PC, 2017) or their financial responsibility. So, when the third-party financial service doesn’t cover part or all of the healthcare service for some reason, perhaps the deductible has not been met or they claim that the service isn’t covered under the umbrella of the financial service, who takes responsibility? Theoretically, the client does, but what happens in practice? The client often feels jilted by their insurance company because they are operating under the false belief that the insurance company is supposed to cover their healthcare expenses, and the client is upset (often with the provider) because now they have to pay the provider for a service they can’t afford, and likely wouldn’t have purchased if they’d known they’d have to pay for it directly. And, what happens when the insurance company says, “I am not going to pay for the healthcare service you received because your provider didn’t follow our convoluted rules,” (i.e., your provider provided your healthcare according to best practices, rather than according to most cost-efficient practices) and now you are responsible for full costs? The client is not going to believe that it’s their responsibility to pay for their healthcare services because their insurance company told them that their provider did something wrong. This damages both sides of the therapeutic relationship: The client feels that their provider has cheated them and the provider feels their client has cheated them. Meanwhile, the insurance company adds the unpaid service to its profit margin. The involvement of a third party in what is supposed to be a reciprocal relationship between two parties, one providing a service and the other receiving the service, creates a diffusion of responsibility; and when that third party is motivated by its profit margin to pay out less in services than its client pays in for services, a conflict of interest develops.
4. Moral Hazard
Related to diffusion of responsibility is the concept of moral hazard. When someone else (e.g., insurance company) is responsible for the risks (e.g., financial) another (e.g., client) incurs, the less responsible party (e.g., client) behaves differently than they would under maximum risk exposure (Wikipedia). For example, a teenager who buys his own car is more likely to take his ownership responsibility seriously, taking better care of the car, compared to a teenager whose parents buy him a car. Let’s consider how this is relevant in therapy. To begin, the financial responsibility for therapy isn’t felt by the client; they do pay for the service, but indirectly by paying for another service (i.e., insurance). The concept of moral hazard would say that the client would be more likely to take on financial responsibility they might not be able to afford if someone else is supposedly responsible. Further, if clients did bear the full, direct financial responsibility for therapy (by paying for services directly), they would not likely seek services unless they could pay for the services. By purchasing and utilizing insurance, clients are putting themselves in positions of financial vulnerability and are likely unaware that they are doing so.
5. Enlightened Self-Interest
The concept of enlightened self-interest also explains which party is most motivated to ensure a payment is made (Powers, 2017). When the insurance company won’t pay a claim and especially when the reason(s) for rejecting a claim is(are) pinned on the provider for allegedly not following the convoluted rules, who is most motivated to make sure the claim is paid: the provider, the insurance company, or the client? The party who is most motivated is the party who stands to lose/gain the most; that is the party who isn’t being paid for a service they already provided, the therapist. As a result, the therapist is highly motivated to spend additional time, fighting with the insurance company to try to get the claim paid. Further, if the insurance company refuses to pay the claim, asserting that the provider failed to follow an obscure rule, the client is exempted from their responsibility to pay for the service that they already directly received. Even if the insurance company does not blame the provider for the rejection, the client has little motivation to pay the claim, given that they have already received the service. The therapist is in a one-down position. Imagine the strain that this lack of reciprocity puts on the therapeutic relationship. Even if the client pays for the service that wasn’t covered by insurance, how are they going to feel, initially going into the relationship with the therapist, believing that all services will be covered by a third party, and then incurring a large bill? Who is the client going to be upset with? Perhaps their insurance company, but how about if the client has attachment problems? And, how about if the insurance company blames the provider for the insurance company’s refusal to pay the claim (e.g., “provider provided a service that was not medically necessary”)? And, what does this process communicate about who is responsible for the client’s care? Taking insurance doesn’t benefit the therapist, it benefits their client. Therapists are being paid less than their market rate (low as it already is), and they have to do a great deal of extra, unpaid work so their client can use their benefits. This isn’t fair to providers.
Not only does the concept of enlightened self-interest identify the party with the highest level of motivation to ensure that claims are paid, enlightened self-interest speaks to personal responsibility for recovery. Like the teenager who purchases his own vehicle, when people pay for something directly, they are more likely to be motivated to “get their money’s worth”, putting more time and energy into their investment. They now assume ownership of the service they have purchased and see recovery as their responsibility, as their recovery. When it appears that someone else is paying for the service (e.g., insurance company), even if this is a false perception, the level of ownership is diminished, as is level of responsibility for recovery.
Adding another layer of complexity to the impact of third-party payment for a service is the fact that when a third party pays for a service, that party assumes control over the type, amount, and frequency of the treatment because that party is paying for the service. That party is motivated to keep costs of services down to maximize profits. Curiously, in the case of health insurance, that party isn’t actually paying for the service, the client is, indirectly. Yet, the third party assumes control over care. By involving a third party in payment for mental health services, clients give up control over their treatment. The insurance company is not doing the client any favors by offering their health insurance service, and neither are therapists by accepting insurance. The client still pays for treatment, but has little control and ownership over their treatment and recovery. Is this a practice we want to perpetuate by continuing to accept insurance and following the treatment practices dictated by insurance companies?
Even if all claims are paid without any problem, lack of reciprocity between client and therapist still occurs. According to Cialdini, the rule of reciprocation states, “…we should try to repay, in kind, what another person has provided us” (Cialdini, 2009, p. 19). How can a reciprocal relationship exist when one person provides a direct service and someone other than the person receiving the service pays for it? Further, what happens when that third party doesn’t pay for the service or pays a pittance for the service? When a relationship is not reciprocal, a power imbalance develops; in this case, it’s a power imbalance with the therapist in power and the client in a position of indebtedness. This type of dynamic is not only counterproductive but can be harmful in the context of any relationship, especially the therapeutic relationship. It places an already vulnerable individual in the position of increased vulnerability and leaves them open to exploitation. This is the antithesis of the dynamic we want to create in therapy.
D. The Future of Mental Healthcare Under the Third-Party Payer Model
1. Enabling the Harmful System to Continue
By credentialing with the insurance companies, and doing to the work to ensure that they pay for their clients’ services (because therapists want to get paid), therapists insulate their clients from their insurer’s devious behaviors, and they enable a harmful system to continue to exist. Consider this example, if a mother protects her children from their abusive father by taking the physical abuse herself, is she actually protecting them? No, she’s not. The way to protect her children is to get away from that man; that is the only way they can all be safe. Further, how able is she to help and protect her children when she’s being abused? Not very well. And, how able is she to change the dynamics that exist in that abusive situation and begin the healing process while she is still living in it? That will be a nearly impossible task and any therapist who works with her is going to focus on getting her out of there, not on trauma treatment. In fact, trauma treatment is contraindicated in situations where someone is actively being abused. Do you see where I’m going with this? If therapists don’t agree with the health insurance system and think it’s harmful to people, including themselves, then they need to get out. Therapists need to make changes from the outside and stop helping to support the system from the inside. Therapists are impotent to make changes when they are dependent on their abusive partner to pay their bills.
2. The Fall of Private Practice Under the Third-Party Payer Model
If therapists aren’t yet convinced that accepting insurance is not in their best interest or in their clients’ best interest, we should talk about the future of mental healthcare under the current insurance system. As discussed earlier, under this system, the medical field has been turned into a factory, and physicians into assembly line workers. The field of mental health is also turning into a factory, utilizing a Western Medical Model that pathologizes abuse, neglect, and other traumas and utilizes briefer, symptom-reduction-based treatments. Providers have been forced to abbreviate treatment, experiencing reductions in allowable treatment session length, treatment frequency, and treatment duration, with more reductions on the horizon. Ultimately, therapists are not able to practice according to best practices if they would like to receive insurance reimbursement.
It is my understanding that the plan is to phase out the smaller clinics and independent practitioners because it’s much more cost-effective to contract with one large clinic than many small clinics. Not only are there fewer contracts to write and manage, larger clinics are able to offer on-call services, which apparently cut down on inpatient hospitalizations, and ultimately, cut costs for insurance companies. Indeed, as mentioned earlier, insurance companies in the Twin Cities Metro area and Duluth have already begun to refuse contracting with new clinicians, unless they are part of a group contract with a larger clinic, so this phasing out process has begun. Additionally, to cut costs, insurers are rolling out therapy apps to cut down on costs of paying actual therapists, further pointing to the start of a phasing-out process. I could be wrong, but it looks to me like Rome is falling. And, as with the fall of the Roman Empire, the smart Romans left before it fell (Powers, 2017). My advice to therapists: When in Rome, leave before the Empire falls.
3. How Providers Can Evolve
As I discussed in the beginning there are many reasons therapists credential with insurance: 1) it’s what everyone does; 2) doing so ensures a steady referral stream; 3) it provides access to care to a wider demographic; an opportunity to “give back”; 4) they have skills deficits and fears that prevent them from converting to private pay such as A) “I don’t know how to market and run a business”; B) “Making money is bad”; “Providing charity is good”; C) “No one who buys insurance will pay extra to see me”; and D) “I’ll never find enough private pay clients to pay my bills”; “Some money is better than no money”. Even if this article has convinced therapists that it would be in their best interest and their clients’ best interest to get off insurance panels, raise their rates, and move to private pay, these rationale and fears will probably keep them stuck. So, I’m going to provide some suggestions to address each of these.
1) It’s what everyone does. I’m going to challenge you to challenge the status quo. It’s terrifying, trust me, I know. (I was terrified to write this article.) Courage is about being terrified but doing something anyway. If you aren’t already working with your own therapist, I’d encourage you to get a therapist and work on some of the fears you have surrounding challenging the status quo.
2) Ensures a steady referral stream. If you learn how to market, you can develop a steady referral stream without being dependent on insurance. Begin networking with other small business owners who have been successful and get to know successful private pay therapists. There are a lot of really great free resources online that will teach you to market your therapy practice. There are also a lot of courses you can purchase, books you can buy, and/or consultants you can work with to help you learn to market. Further, many of the consultants offer free resources via podcasts, blogs and mini-courses. I’ve mentioned many of them below.
3) Provides access to a wider demographic; an opportunity to “give back”. I don’t believe that your business is necessarily the place to give back (or that you need to give back more than you already are as a therapist), but if it must be, please follow the airlines’ moto, “Secure your oxygen mask before assisting others.” Until you are in a place of financial integrity, it is not the time to give back. And when you are in a place of financial integrity and if you insist that you need to give back through your business, you can offer some sliding scale or pro bono spots. However, there are some dynamics that can play out when offering services for reduced rate or free, so please be aware (McLain, 2018). This also might be something helpful to work on with your individual therapist. And, I’ve included some books addressing financial integrity below.
4) Skills deficits and fears related to running a business get in the way. For the skills deficits, again, there are a lot of great, free resources and courses to help you learn to run a business (e.g., “Selling the Couch Podcast”); there are also some great courses you can purchase (e.g., “Abundance Practice Building”; “Your BadAss Therapy Practice”), books you can buy (e.g., Profit First; The Dip; The Millionaire Next Door; Your Money or Your Life) and/or consultants you can hire to help. Network with other successful professionals and figure out their methods. For the fears, I would specifically like to address the fear, “No one who buys insurance will pay extra to see me.” Yes, they will, and they are actually paying someone right now; that person is called their life coach. And, their life coach is charging them between $200-$667 per hour for a service you are fully capable of providing (Burza; Marver; Stimpson). As I mentioned before, working with an individual therapist will be helpful in overcoming your fears. Books such as Be a Wealthy Therapist, podcasts such as “The Practice of Being Seen” and courses such as Tiffany McLain’s “Lean In. Make Bank.” address many of these fears and provide opportunities and exercises for therapists to work through these fears.
If you, as a therapist, want to remove yourself from insurance panels and move into the world of private pay, it will be scary (terrifying) and will require learning some new skills, but it is possible. And, if therapists want to create a sustainable existence for ourselves, our clients, and our field, we have no choice but to evolve and make a paradigm shift. With any paradigm shift, there will likely be an upheaval and chaos as we all adjust to the new way, but such is the nature of challenging the status quo. The alternative to evolution is fairly undesirable.
Brianna Mann, Ph.D., works with protectors, caretakers, and high achievers in the Lake Minnetonka, Mound, and St. Louis Park, Minnesota areas. Brianna has been a therapist, specializing in the treatment of anxiety for 13 years; for more information, please see www.briannamannphd.com
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