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Self-Pay Clients, Not Insurance Companies, Deserve a Discount

Copyright ©2004 Ivan J. Miller, Ph. D.
(Published in 2004 in the Independent Practitioner, 24(4), p 166-167.)

I am often asked about the legality and ethics of giving self-pay clients a discount so that they pay less than an insurance company. I am asked about these discounts because I am President of an organization of 78 psychotherapists in Boulder, Colorado, the Boulder Psychotherapists’ Guild, Inc., and we offer clients a 20% discount on individual and family therapy when they pay at the time of service, and there is no paperwork for insurance or any other party. If properly done, this discount is legal and ethical, and moreover, it makes sense, is good business, and does not decrease income.

Strangely, in the perverted world of health care financing, most insurance companies insist on a discount but many clinicians worry that it might be illegal to give a discount to a client. Insurance companies receive the discount in spite of creating paperwork, putting therapists and patients on hold for long time periods when they phone, losing enormous quantities of mail, mismanaging accounts, invading privacy, and generally lowering the quality of life for almost everyone who deals with them. Yet the self-pay client, who is easier to care for administratively due to the absence of insurance bureaucracy, has historically paid the highest fee. This is not only unfair, but it is a poor business practice to make the least time consuming clients pay the most money.

In 1994, when I established the Guild, I decided to address this unfairness. As an organization that is not only dedicated to preserving the integrity of client-focused psychotherapy, but is also intent on serving consumer needs, the discount was incorporated as part of our commitment to consumers. We have two rationales. First, the advertised discount is promised only to clients who state in their initial contact that they are referrals through Guild advertising. As such, the discount is offered in the same manner as discounts are offered to any participant in an insurance plan that has negotiated a lower rate for its members. It is a group discount that could be offered by any businessperson to any group such as seniors, veterans, or professional colleagues. Second, and more general, is the rationale for the discount that I offer in my practice. I give a $30/session discount to any client who pays at the time of service and does not require a statement that can be submitted to insurance or other paperwork. I explain the reason for the two fees is that I have two levels of service. One level, the discounted service, is consultation and therapy. The second level is consultation and therapy plus hassling with insurance companies or other third parties.

The discount is actually just a method of appropriately pricing services. In other businesses, shipping and handling charges or other administrative charges may be added on top of the sale of a product or service. It is no different than offering a cash discount because it saves administrative and billing expenses. In dealing with insurance, however, the additional expenses cannot be specified in advance and need to be spread over all insured. As clinicians are well aware, the expense of dealing with insurance is enormous. The hours of pursuing mishandled claims are extensive. When clients submit their own claims, I have still found that insurance can ask for additional paperwork. Even an insurance company that has historically handled claims efficiently and properly can change management and institute onerous practices. Today’s good insurance company can have a financial crisis and become tomorrow’s typical insurance company. It is good business to charge differential rates for the two levels of service.

I have found the price differential between the two levels of service appropriately compensates me for my time. When I bill insurance, I find that the higher fee merely covers the hours of my time dealing with insurance, the stress of dealing with industry-wide incompetence, and insurance company induced brain damage. Because I am compensated, I have a better attitude than when I was dealing with insurance without extra compensation. Furthermore, I have the good feelings that come from knowing that I am not asking my self-pay clients to absorb expenses that are imposed by insurance for other clients. I do not lose income because each level of service is priced to pay for its actual costs.

Fortunately, I do not need to worry about breaking any contractual arrangements with insurance companies because I have not signed any contracts to work for insurance companies. I am always an out-of-network provider. I could not do this if I had agreed to a contractual rate with a company.

In order to keep the two levels of service distinct, I do not give self-pay clients a statement that can be submitted to insurance. I do not include a diagnosis on these statements and sometimes do not include a procedure code. In fact, I do not routinely give statements to self-pay clients unless clients request them. If asked, as a good businessperson, I am glad to provide a statement. These diagnosis-free statements are good enough for clients who have a pre-tax cafeteria plan or medical savings account. They also are good for income tax purposes.

My higher fee for counseling or therapy plus paperwork applies not only to insurance but also to any other third party payer who requires paperwork. One example is the victim’s compensation funds that require progress reports and treatment plans.

Over the past ten years, I have had a few clients who wanted the lower fee, and still wanted a statement that they could submit to insurance. These clients said they would endure the insurance hassles and thought they deserved the discount. I have refused these requests for two reasons. First, I am not going to submit different fees to insurance companies. I have only one fee that goes on insurance statements. Second, I have found that any time insurance is involved; it can turn into a mess. I know how my business works and the potential hassles and the policy is based on that knowledge. I did lose a few clients, but in each case, the potential clients were looking for therapy as a way to manipulate or please someone in their environment. These potential clients seemed to place little value on their therapy and wanted to spend as little money as possible while complying with the requests to get therapy. They were not clients who were unable to afford therapy, and if they were I would have negotiated a sliding scale payment. Overall, I believe my policy makes sense and my clients do as well. Typically, clients emphatically and supportively say they completely understand.

To obtain the discount, I ask clients to pay at the time of service in order to reduce book keeping and administrative expenses. Of course, some clients forget to bring their money. In these cases, I simply explain that I have a system for when clients forget and hand them a self-addressed and stamped envelope so they can mail the payment. Often, when I am putting the stamp on the envelope my clients generously offer that they can provide their own stamp. In response, I politely say that I want to make it easy for them to send me the money. In this exchange, my clients understand that I am serious about the payment at time of service but also am understanding that people can sometimes forget.

I have been asked if it is illegal to charge insurance companies more than clients for the same service. I believe that is illegal, and that there may be insurance fraud laws that specifically prohibit charging insurance more than the established rate. However, this is not what I advocate or do. I have different levels of service. I understand that we should set our fees for each type of service and not raise fees for one customer unless there is a policy with a rationale. Once fees are set, we can offer discounts for insurance companies, payment at the time of service, sliding scales, or what we call in the Guild, “no administrative services” discount. Each of the discounts should have a sensible rationale, and it would be unethical to charge a client or an insurance company more on an arbitrary basis or just because they could pay more.

Having advocated discounts for self-pay clients, there is one caveat that I need to raise. Insurance is regulated by state law, and anyone who offers clients a self-pay discount should review all state laws on insurance fraud and professional billing policies. These state laws may change the way that discounts need to be offered.

Discounts for self-pay clients make sense. They also make a statement that insurance should be paying the increased administrative costs of delivering health care. Let us give the self-pay clients the break they earn by keeping us out of the insurance quagmire.

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