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Some information on these pages
is adapted from the pamphlet
"Insurance Quandaries & Questions"
(Consortium For Psychotherapy).

Payment Options: Self-Payment

Many people decide to pay for therapy from their own financial resources. Some insurance policies have high premiums, deductibles and/or co-payments, and many managed care policies allow you only a limited number of sessions. Therefore, it is important to weigh long-term costs, concerns about confidentiality and considerations of continued access to services in deciding whether self-payment is viable.

In addition to out-of-pocket self-payment, changes in tax laws have created new ways to help you pay for your own psychotherapy. Current options include medical savings accounts and pre-tax flexible spending medical accounts with no restrictions on providers except dollars in the account. These options may be available to you as an employee or if you are self-employed.

If you are interested in self-payment for your psychotherapy, you might want to explore these options depending on your type of employment and the benefits your company offers.

Cafeteria Benefits Program: Allows an employee to choose among two or more benefits options to select coverage for medical and mental health care. Some benefit programs allow employees to select actual coverage areas and limits.

Medical Savings Account (MSA): An alternative for small businesses or self-employed persons to set aside pre-tax dollars (usually between $1500 and $3000) to a specified amount equal to the deductible on a major medical health insurance policy. (The large deductible makes the policy affordable.) If you don't use the amount set aside for health care, it may be rolled over into a retirement or other pre-tax savings account. If withdrawn, the money is subject to taxes and tax penalties.

Flexible Medical Spending Account (Flex Account): Similar to MSA except provided by employer. Pre-tax dollars are set aside to spend on healthcare not covered by the company's deductible and co-pays, ranging from $300 to $2,250 a year for employees and dependents. The employee can use this money for any health related expense. The downside is that dollars not used revert to IRS at the end of the year.

If self-payment for therapy seems too difficult because none of these options is available to you or because you have limited financial resources, discuss your concerns openly with your psychotherapist. Many psychotherapists are flexible about financial matters and are willing to negotiate with you for a reduced payment or for alternative payment schedules.

  Types Of
  Healthcare Insurance


"Insurance" is a term that refers to the methods for third party reimbursement. These range from traditional indemnity plans that allow you to receive services from any appropriately licensed psychotherapist to managed care or health maintenance organization plans which authorize payment only if a service provider is selected from a limited list of mental health providers.

If you are purchasing a medical coverage policy for yourself, inquire about the mental health options available to you. Select a plan with maximum flexibility. Read your policy carefully and be sure to get all your questions answered before you sign up.

If your medical coverage is provided by an employer, ask about the terms of your benefits package. Once a year, usually between October and December, employees of many organizations have the opportunity to change their benefits. If possible, you may want to consider changing your medical coverage to a policy that supports mental health, that provides third party reimbursement for the discipline of a particular psychotherapist you want to see, and/or that includes a particular psychotherapist on the preferred provider list for your third party reimbursement. The following definitions explain some of the common types of health insurance.

Indemnity Insurance: This refers to the traditional, fee-for-service insurance that pays for medical expenses after services are rendered. These plans often limit the benefits available for mental health services to a pre-determined amount. You are responsible for payment of a pre-established deductible (for example, $250, $500 or $1000) each calendar year. After you pay the deductible, you generally pay for a percentage of the on-going services for which you seek reimbursement up to a set amount each year. Then the policy pays 100 percent. Precertification rules vary by the terms of your policy. Traditional insurance plans usually allow you a wide range of freedom to choose the health care provider.

Health Maintenance Organization (HMO): These plans negotiate a discount from hospitals, physicians, labs, pharmacies, and other providers. Provider payments range from capitated contracts to discounted fee-for-service. Most HMOs and managed care plans limit the number of psychotherapy sessions that are available to you on a yearly basis and/or regulate the maximum dollar amount that can be allocated for mental health services. If you have an HMO you are required to use the services of providers on an approved list. Models of HMOs include:

  • Closed Panel Or Staff Model: The HMO employs psychotherapists or doctors who provide full-time care to members. You generally visit the physical location of the HMO to receive services within this model.
  • Group Practice Association: The HMO negotiates a reimbursement plan with a large group of primary and specialty care providers (vertical network) that includes a fixed advance payment for HMO clients. The providers must manage the delivery of services to clients within this model.
  • Individual Practice Association (IPA): Providers in private practice contract with several health plans for a set fee, paid in advance.
  • Network-Model or Group-Model HMO: The HMO contracts with more than one independent multi-specialty group or network.
  • Open-Access HMO: This model was introduced in 1996 to permit increased client access to specialists rather than require all referrals to come from primary care or gatekeeper physicians.
  • Open-Ended HMO: Similar to the traditional HMO with the addition of coverage for procedures performed outside the HMO.

Preferred Provider Organization (PPO): These plans offer members the option of care from a "preferred" or contracted network with a small co-pay or care from a provider "out of network" with a deductible and a higher co-pay.

Point-Of-Service (POS) Plan: These plans allow the covered person to choose care from participating or non-participating providers with different benefit levels. This model is similar to a PPO.

Self-Insurance: Some employers establish their own health insurance plan to fund employees' routine medical expenses up to a specified amount. For excess medical costs, employers carry a less expensive catastrophic policy with a very high deductible (usually $10,000 to $25,000) which covers payments that exceed the company's pool of funds. If the employer administers its own plan, the employee has no guarantee of confidentiality in the workplace regarding diagnosis or treatment.

Exclusive Provider Organization (EPO): These plans are similar to a PPO, with providermembership limited to an approved list of providers and medications and a larger co-payment (up to 30 or 40 percent) for providers not on the approved list.

  Additional Insurance And
  Managed Care Terms


It sometimes is difficult to decipher the administrative and paperwork protocols that accompany the processing of requests for third party reimbursement. The following definitions may help you translate this professional jargon into a language you can understand and use.

Capitation: A stipulated dollar amount negotiated per member enrolled in a health plan and paid regularly to a provider who is responsible for delivering the care required by any person covered under the contract (this may lead to rationing of services).

Capitation Fund: In lieu of reimbursing providers on a direct capitation basis, an HMO may establish a fund to reimburse providers on a negotiated fee-for-service basis while the HMO monitors client visits, treatment services, and procedures and referrals to specialists for overutilization. Providers are notified if they exceed the norm.

Carve-Out: A decision by an insurer to set aside defined medical services such as mental health for separate contracting with a specialized, stand-alone provider.

Physician-Hospital Organization (PHO): A legal, negotiating, contracting and marketing entity formed and owned by one or more hospitals and provider groups for contracting with payors.

Independent Practice Organization (IPO): also known as Independent Practice Network (IPN): Providers who contract directly with health care plans and with employers (self-insured plans).


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Copyright 1999 The Psychotherapy Guild
Last updated May 1999.