The Pros and Cons of Insurance vs Private Pay for Psychotherapy

Here are some things to consider when deciding between private pay and insurance.

The Benefits of Using Insurance for Psychotherapy

1. Lower Cost. This is clearly the primary reason for using insurance. Private-pay rates are significantly higher than paying with insurance. However, keep in mind that insurance plans vary on copays and out-of-pocket amounts. 
2. A Vetted List of Therapists. Insurance companies have criteria for accepting therapists onto their panels. This can include requirements such as having practiced a certain amount of years or using evidence-based modes of treatment.
3. Therapists Familiar with Insurance. An insurance-based therapist may be able to help you navigate the complexities of your plan and provide some guidance around diagnoses and payment policies.
4. Customer Service. The quality of customer service among insurance plans varies. If it’s good, you’ll have an agent who can answer questions about your mental health coverage and the reach of your provider network. 
   

The Cons of Using Insurance for Psychotherapy

1. Less Privacy. Your therapy records may be subject to audits by your insurance company who could view your treatment plan and diagnosis. Also, some companies encourage or even require their therapists to keep session notes online (on the insurance company’s private and secure portal).
2. Required Diagnosis. Clinicians are often required to provide a mental health diagnosis to justify the necessity of the treatment. This diagnosis becomes part of your insurance record and could potentially influence future coverage or premiums. Additionally, there are some employers that ask potential hires to disclose any diagnoses, and may reject applicants who have a documented mental health condition.
3. Busy Therapists. Because of fixed pay rates and admin tasks, therapists whose businesses are based on insurance often see clients back-to-back in order to make ends meet. This doesn’t necessarily mean you’ll get a burned out therapist, but it’s something to keep in mind.
4. Not Accepting New Clients. Depending on the insurance company’s current pool of active therapists, there may potentially be a waitlist for new clients.

The Benefits of Using Private Pay for Psychotherapy

1. Insurance Reimbursement. Clients may be able to have private, out-of-network therapy sessions reimbursed by their insurance. The portion or percentage of reimbursement varies by insurance company, so it’s best to call your insurance to find out the details.
2. More Privacy. As mentioned earlier, there are more privacy advantages by not using insurance. Additionally, a diagnosis is not required.
3. Specialization and Niche. Private pay therapists may have an established niche in the market and only specialize in specific areas. For example, they may only work with women, or specialize in OCD, which means you’re likely to benefit from their specific experience and knowledge.
4. ROI. That's right, return on investment. Instead of focusing solely on price, consider the long-term benefits of therapy. Not just feeling better, but doing better, in your relationships, career, and other areas of your life. It's hard to put a price on that. Bottom line: find a good-fit therapist, whether it be private pay or insurance.

The Cons of Using Private Pay for Psychotherapy

1. Higher Cost. With private pay, you cover the full cost, and, as mentioned previously, insurance may partially reimburse you. As with any service, be it therapy, legal services, or plumbing, you have to weigh the cost vs benefit. 
2. No Insurance Oversight. While private pay can offer more privacy, therapists who take insurance are required to create treatment plans and keep good records, which encourages a baseline standard of care. 
3. Diagnosis Not Required. Insurance-based therapy typically requires a diagnosis, which can encourage therapists to examine a client’s symptoms more carefully, in order to give the most accurate diagnosis. However this is not to say that private pay therapists don’t consider symptoms, it’s just worth mentioning how requirements may or may not impact quality of care. 
   

Conclusion

As a therapist who’s also been a client, I’ve had an excellent therapist who took insurance and an excellent therapist who didn’t. When I saw the insurance-based therapist, I was in my early twenties, and I didn’t even know that private pay therapy existed. 

When I was in grad school studying counseling, I chose to see a private pay therapist who came highly recommended, because of his particular niche. I justified paying out-of-pocket because it was a great fit and I clicked with him. 

Whether you use insurance or private pay, choose fit over price. If you don’t click with your therapist, you’re less likely to solve your problems and reduce symptoms. Many studies suggest that the therapeutic relationship is the number one factor for clients achieving positive outcomes.

Full disclosure, I take private pay and not insurance. After considering the pros and cons for therapists (that’s a whole other blog post!) I opted not to contract with insurance companies in my practice. 

I tried to make this post as objective as possible in the hope that you, the potential therapy client, can decide what works best for you. 

For more on choosing a therapist, see my blog post 5 Ways to Make the Most of Counseling.