Can I Convert Insurance Clients to Private-Pay Clients?

By Barbara Griswold, LMFT  (July 10, 2017)

Q: “I want to limit the number of insurance clients in my practice.  Can I tell new insurance clients that I can only accept them if they pay out-of-pocket?”

A:  There is no denying the math:  Too many insurance clients means you are doing more work for less money.  With each insurance client, you accept a sharply discounted rate, yet have more unpaid paperwork time.  In addition, taking on too many insurance clients may not leave room for new private pay clients.  For these reasons, it may be common for therapists to limit the number of time slots for insurance clients.  But is it legal?  Ethical?

For the answer, I turned to Michael Griffin, JD, attorney at the California Association of Marriage and Family Therapists.

“By signing a contract with the health plan, the therapist has agreed to accept that particular insurance plan as payment” for all plan members, says Griffin. “If the therapist later requests that the client not use the insurance and instead pay out of pocket, there is an issue of breach of contract with the insurance company.”

In addition to violating your contract, “the insurance plan would almost certainly object to any practice which imposes a limitation on access to the insurance client, compared to the cash paying client,” say Griffin.  “If the therapist pulls this kind of ‘bait and switch,’ in addition to a contract violation, it is probably unethical.”

In fact, says Griffin, “the therapist may be accused of making unfair, deceptive or misleading representations if he or she is listed on a provider database as ‘contracted’ and the client relied on this, yet the therapist subsequently informs the client, ‘I will only take you if you can pay me out of pocket.’”

Even if the client initially agrees to pay out of pocket, down the line he may change his mind.  He may get angry at you for some other reason, or someone might advise him that he should not have agreed to this arrangement.  The client could complain to the insurance plan, or even file a complaint at your professional association’s ethics committee or your licensing board.

Put yourself in the client’s place. How would you feel if a doctor’s office told you that yes, they were indeed a provider on your insurance plan, and yes, they did have availability, but could only see you if you paid out of pocket?

Now let’s look at a different scenario.   A client says he does not want to use his insurance due to confidentiality concerns.  This would be completely ethical, since the client is the one requesting not to use his insurance.   In this case, it is important not to give the client any kind of invoice to submit to their insurance plan.  I would strongly suggest you not only document this conversation in the client progress notes but also have the client put his waiver in writing in case he changes his mind and wants you to bill for past sessions (a sample Private-Pay Agreement is with the other sample forms in my Practice Forms Packet and in the back of my book).