Why Therapists Don’t Take Insurance

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Due to a shortage of mental health professionals in the US, it’s becoming difficult to find a therapist who is currently accepting new clients. It is even more difficult to find one who accepts your insurance. Many therapists would like to become in-network providers, to make mental health care as accessible to the public as possible. But several factors deter them from doing so.

Here are 7 reasons why many therapists don’t accept insurance:

Low Insurance Rates

Within this field, it’s common knowledge that therapist insurance rates are largely quite low. To consumers, the 50-minute session rate may appear deceptively decent.

At your run-of-the-mill W-2 job, employees are paid for all time worked—no matter the task. But business owners, like private practice therapists, are not compensated for all work activity. They are only compensated for client-facing hours, not for administrative time, though it’s required to operate and maintain a viable business. Some of these activities include marketing/building an online presence, networking, training, note-taking, phone consultations, locating client resources, responding to emails, etc. As a crude example, if an insurance company pays a therapist $80 for one 50-minute session and the therapist completes an additional hour of administrative tasks, the rate looks more like $40 ($80 divided by 2 hours of work). That is before factoring in business expenses.

And private practice therapists aren’t only taking in money; they are spending money. Therapists must earn enough to afford the cost of running a business. These expenses often includes a business license, clinical license, BBS-required yearly continuing education units, multiple liability insurance policies, clinical consultations, specialized trainings or certifications in the therapist’s area of practice that can range from a few hundred or thousand dollars to over ten grand, high cost of rent if they maintain a physical location and utilities, software and accounts receivable subscriptions, online therapist profiles, professional association membership dues, and more.

In a Slate article, therapist Margie Ryerson stated therapists who accept insurance may not see an increase in their insurance rate for years:

“Whereas most employed people receive raises from time to time, years went by with no change in my compensation from insurance companies. I checked with other therapists and everyone else experienced this as well. It got to the point after a few years where we were paid less per session than the price of a mani-pedi or salon haircut. Not to denigrate salon workers, but they typically don’t need to invest years of post-graduate education, training, and expense to qualify for their jobs.”

Historically-High Student Loan Debt

Like other professionals, therapists invest in their education with the intention of pursing their interests and passions while building a financially-secure life for themselves and their families. In many states, becoming a therapist requires at minimum the purchase of two degrees (bachelor and master). With the cost of college tuition being at an all-time high, the therapist’s financial responsibilities have too risen. Many therapists now graduate with well over $100k of student loan debt, and must make substantial monthly payments to their loan providers while trying to afford their living expenses. Offering low-cost therapy is simply not practical for many therapists, especially those with student loan debt, or those who won’t receive familial inheritance to supplement delayed retirement savings.

In an article by California Health Report, Bay Area-based therapist India Gomez, PhD said:

“Eight years from starting graduate school to licensure and I came out with a house worth of student loans.”

Higher Caseloads

Speaking of burnout, when therapists accept a low session rate, they often find ways to make up for the low compensation. One easy solution is to increase their caseload, which will naturally increase their earnings. While caseloads vary therapist to therapist, a full-time caseload is considered 20-25 clients per week (not counting administrative hours). Some therapists may increase their caseloads beyond what is sustainable for them. They may slowly begin to burnout and become less engaged and less effective. Keeping a reasonable caseload allows therapists to maintain their mental wellbeing and attune appropriately to their clients.

Lengthy No-to-Low Earning Periods

After graduating with a master or doctoral degree, graduates must work as “interns” or “associates” to earn hours towards licensure. At best case scenario, therapists spend just under 3 years at low-paid “internships,” many relying on their families financially to weather this period. The length of the education-to-licensure process can differ based on several factors such as type of degree, the state in which the therapist practices, and personal lifestyle factors. In states requiring a masters degree at minimum to practice, between the multi-year-long internship period and a painfully slow licensing process, therapists can spend a minimum of 9-11 years making no-to-low income. Similar to doctors and lawyers, master and doctoral-level mental health professionals have delayed their productive years in order to practice in their chosen field.

Insurance Fraud

For insurance companies to cover therapy sessions, people need to have “medical necessity.” That means, the person must meet criteria for a mental health condition as described in the DSM (the large book we use to diagnose people). If an individual does not meet medical necessity, most insurance companies won’t pay for therapy, and the client must pay out-of-pocket. Frustrated by this barrier to therapy, some mental health professionals apply false diagnoses to their clients so that insurance coverage can occur. But this is fraud. One benefit of not taking insurance is, I have more influence over the length and type of therapy my clients can access because insurance companies aren’t dictating what is available to them.

Insurance Payment Issues

The insurance payment process can be quite slow. Some therapists wait up to 90 days to receive compensation for work that occurred months earlier. In some cases, the insurance company denies the claim, citing insufficient paperwork, etc. Therapists can put a great deal of effort appealing that decision…only to be unsuccessful. Well-known therapists on Youtube and my peers reported completing a generous amount of work that they ultimately weren’t compensated for.

Then there are the “clawbacks”: payments that insurance companies initially issue but later require back from therapists for a variety of reasons, including progress notes, treatment plans, or paperwork that don’t quite meet their organization’s standards. As I have seen in my field, those standards aren’t completely clear; therapists use their best judgment to attempt meeting them. A handful of therapists offer their peers specialized trainings on how to best reduce these unfortunate outcomes because many therapists have either experienced them or worry about them. For these reasons, many therapists have determined that the payment process is not worth the time or financial risk. As business owners, private practice therapists must ensure that they are maintaining a reliable and steady stream of income to cover their business and living expenses.

Healthcare Premiums & Retirement Contributions

One perk of being a W-2 employee is that many companies offer employer-sponsored healthcare benefits and retirement accounts. Employers make these benefits more affordable and accessible to everyday working people. Self-employed therapists often take on the entire cost of their healthcare premiums and contributions to their retirement account, unless they have a partner whose healthcare plan they can utilize.

* Insurance rates can vary based on state, insurance company, length of session, and type of license. Each insurance company's practices and policies differ. The purpose of this blog is to share common reasons why therapists choose not to accept insurance based on my personal experience and discussions with professional peers.