You have health insurance! Awesome! Now you can finally take care of all your health needs! But first, what’s a deductible? What’s the difference between a copay and coinsurance? Can you use your health insurance for therapy?
In the past decade, I’ve learned quite a bit about health insurance and psychotherapy. Consequently, I thought I’d write a short summary of some basic information I’ve gleaned over the years.
Is Therapy Covered?
You can learn about your behavioral health benefits in a number ways. First, you could call the phone number on the back of your insurance card and ask a customer service representative about the details of your plan. Insurance companies usually refer psychotherapy and counseling as behavioral health. When inquiring about behavioral health benefits, it helps to ask if you need an authorization, have a deductible, have a copay/coinsurance, and how many sessions you are allowed.
Maybe you hate making phone calls. Or you want to avoid an incredibly long wait time. No worries. Another option is to go to your insurance carrier’s website and click the link that says something along the lines of “find a provider.” In all likelihood, the website will ask for the details of your specific plan and then direct you to providers covered by your insurance. You could also call providers that appeal to you and ask if they accept your health insurance.
What is a deductible?
These days many health insurance plans have a deductible. In a nutshell, your deductible is the amount you must pay before your insurance will cover all or a portion of your healthcare costs. For example, let’s say you have a $2500 deductible. To keep things simple, imagine you pay your therapist $100 per session and psychotherapy is your only health expense. After 25 sessions, once you have paid $2500 out-of-pocket for healthcare, insurance will start covering the cost (or part of the cost) of your therapy until the end of the year.
What is a copay?
A copay, short for copayment, is the portion you pay for your healthcare. If you look on your insurance card, the copay for therapy is usually the number listed next to “specialist.” Copays are generally a flat rate. If you have no deductible and a copay of $20 then you will pay $20 per therapy session.
What is coinsurance?
Like a copay, coinsurance is the portion you pay for your healthcare. Coinsurance is sometimes referred to as “cost sharing.” Unlike a copay, which is usually a flat rate, coinsurance is the percentage of a contracted rate. If your healthcare provider receives $120 for services rendered and your coinsurance is 20%, then your responsibility would be 20% of $120 or $24. If the provider’s contracted rate is $80 per session, then your 20% coinsurance would be $16.
What is a contracted rate?
When a therapist joins an insurance panel, they sign a contract accepting a particular rate decided by the insurance company. The contracted rate is the fee the insurance company agrees to pay the therapist. In most cases, the contracted rate is less than the therapist’s typical fee. For example, a therapist might charge $150 for an intake appointment. If the contracted rate for this appointment is $100, however, the therapist may submit a claim for $150 but the insurance company will pay $100. Importantly, your coinsurance and deductible are based on the contracted rate and not the therapist’s typical fee. If your provider is submitting claims to an insurance company and you have a deductible, they must charge you the contracted rate. Similarly, your coinsurance will be a percentage of the contracted rate and not the therapist’s typical fee.
What is an out-of-pocket maximum?
An out-of-pocket maximum is the most you can pay for healthcare in a given year. For example, if your out-of-pocket maximum is $7500, once your payments (deductible, copay, coinsurance) reach $7500, your health insurance will cover 100% of your healthcare costs. You may hear someone speak of breaking a bone early in the year and then gleefully talk about how they will finally start therapy and get that hip surgery their doctor has been recommending. The broken bone likely cost more than $7500 to mend; consequently, all healthcare for the remainder of the year would seem “free.”
What does this look like when you put it all together?
Let’s say your benefits look like this:
Out-of-pocket maximum: $7500
You decide to start therapy. You find a highly recommended therapist who charges $150 an hour and is on your insurance panel. The therapist’s contracted rate with your insurance carrier is $100 for a 60-minute appointment. Providing you don’t visit any other healthcare providers (i.e., primary care physician, urgent care, ER, etc.) this year, you will pay $100 for the first 25 sessions until you have paid a total of $2500. At this point you have “met your deducible.”
At the 26th session you will pay $20 since your coinsurance is to be 20% of the contracted rate. If your only healthcare cost is psychotherapy, you won’t meet your out-of-pocket maximum as you would have to pay $20 for 250 sessions in order to reach the $7500 limit. That would be roughly 5 sessions a week, and a very unlikely treatment plan. With that being said, if you have a few other healthcare expenses you may meet your out-of-pocket maximum. Let’s say you’ve paid $2500 out-of-pocket for therapy, and then you have a few other procedures that cost about $5000 in coinsurance payments. Once $7500 leaves your wallet and goes into the hands of healthcare providers, therapy will be “free.” (I put “free” in quotation marks, because you are likely paying a premium every month for your health insurance – but not having to run your credit card every session will certainly feel free).
What about EAP (Employee Assistance Program)?
In many cases, employers offer anywhere from 3 to 20 sessions of "free" therapy as part of an Employee Assistance Program (EAP). Again, I put "free" in quotation marks because you actually pay for this service when you pay your insurance premium. Always check with human resources to determine if your employer offers EAP benefits. You will need an authorization number to begin. Be sure to inform your therapist that you are going through an EAP and provide your authorization number so that they can file the claim correctly. You cannot receive EAP benefits without an authorization number.
Why can’t YOU just tell me my benefits?
I cannot speak for other providers – but I do not know your healthcare benefits until after I file the first claim. At that time, I receive an Explanation of Benefits (EOB), which you will likely receive as well. Sometimes I receive an overall view of your entire healthcare benefits; other times I’m just told what your insurance carrier will pay and your responsibility. EOBs often clarify any misunderstandings you may have about your benefits. If you overpay, I will always pay you back. If you owe more than expected for some reason, I will always tell you and try to work out some sort of payment plan.
Why would a therapist’s fee differ than the contracted rate?
People sometimes don’t want to go through their health insurance for psychotherapy. These individuals usually “self-pay” a rate decided upon with the therapist. Often times, therapist’s self-pay rates are greater than the contracted rates they have with insurance carriers. Rarely, insurance companies pay providers their self-pay rate or higher. There are many reasons a therapist’s fee might differ from contracted rates. Therapists usually do market research to determine a self-pay fee based on their level of education, years experience, caseload, area served, specialties, expenses, caseload, etc. Insurance companies generally do not take these factors into consideration. Furthermore, contracted rates vary between insurance companies and sometimes even between providers for several reasons.
Why don’t you take my health insurance?
Therapists are not like other healthcare providers. When we apply to be on an insurance company’s panel, some companies will reject the application indicating that there are too many therapists in that area. Odds are that if I don’t take your health insurance it is because I have applied to be on their panel multiple times and they are not currently accepting new providers. Some therapists choose not to accept health insurance for a number of reasons. For example, some companies pay much less than the standard rate and have not increased how much they pay their therapists for years. With the ever-increasing costs of living, this starts to feel like a substantial pay cut. Other providers would rather not spend their time filing claims or calling insurance companies; instead, they might want to spend that time pursuing continuing education or researching specific interventions to improve their therapeutic skills.
Specific plans can be nuanced and complicated. For instance, a person may have both a copayment and coinsurance! Which one would apply to therapy? You may also have a family out-of-pocket maximum as well as an individual out-of-pocket maximum. When do you get "free" therapy? The purpose of this little FAQ is to go over the basics. Specific questions about your health plan as it applies to mental healthcare benefits can best be answered by your insurance company.