Therapists and counselors in private practice find all kinds of creative ways to keep clients coming back. Some therapists offer clients package pricing, which they might also call a prepayment discount. For example, a therapist who charges $100 per session might offer five sessions for $450 if the client agrees to pay up front. Under either name, the therapist agrees to a price cut in exchange for a commitment to a certain number of sessions.
At first glance, everyone wins with such an arrangement. The therapist has cash in hand, the client saves money, and the client’s commitment to therapy may reduce dropouts and missed sessions. But such arrangements carry meaningful risks for therapists. These discounts can wind up costing therapists much more than they are worth.
If you are in-network with any insurance companies, the contracts you have with those companies may include several clauses related to your fees for both insurance and non-insurance clients. Naturally, insurers do not want to be paying more for your services than what clients outside of their plans have to pay. Those contracts may specifically prohibit you from charging lower fees to other clients than what you charge for clients covered by their plan. If you discount your fees for cash-pay clients who prepay for multiple sessions, you may be violating the terms of your insurance contracts. If the insurers you contract with discover the discount, they may demand that all of their payments to you — even going back for months — be based on the lower, discounted rate.
Accidentally becoming an insurer yourself
Whether you work with insurance or not, the biggest risk of package pricing and prepayment discounts is that you actually are becoming a health insurer by offering these reduced rates. In broadly reviewing package pricing deals in health care, a group of state insurance commissioners warned that any such package involving “assumption of risk” amounted to providing insurance. (That article gets a bit technical. Here’s a shorter one on the issue from the same author.)
Here’s why: If the client winds up not needing all sessions included in the package, and remaining sessions are not refundable, they lose some of the money they paid. Their loss becomes your profit, just like when a health insurer benefits from having healthy people enrolled in their plans.
On the other hand, if the client uses every session in the package, you lose money compared to having clients simply pay at each session. It’s this gamble that might legally make what you are selling a form of insurance, rather than simply a payment for services.
It’s perfectly legal to provide insurance, of course, but you have to follow all the rules for insurers, including getting a license as a health insurer. I don’t know many therapists who are interested in actually becoming health insurance companies.
Obviously, the easiest way to avoid these potential problems is simply to not offer package pricing or prepayment discounts. There are many other ways to encourage client commitment without running afoul of insurance contracts or becoming an insurer yourself.
If you do want to offer a package deal to prospective clients, it may be worth your while to carefully review contracts you have with insurance companies to see whether such deals are even allowed. You may even want to have an attorney assist in that review process.
It also would appear to reduce the risk that you are accidentally becoming an insurer if you make any unused sessions in a package fully refundable. Doing this on a prorated basis removes the “risk of loss” issue. In the example at the beginning of this post, if a client bought five sessions for $450 and left one unused, they would be refunded $90. That is one-fifth of the original payment amount.
If the therapist only refunds $50, arguing that the four sessions are charged at the regular rate because the client didn’t use the full package, then the package could still be seen as presenting risk of loss. Making a prepayment discount or package pricing refundable might not change the legal considerations as to whether you are providing insurance, but it seems likely to reduce the risk of a client complaint.
Some caveats are worth adding here. As mentioned below, I’m not a lawyer. If you are seeking legal advice on pricing, insurance contracts, or any other issue, consult with an attorney in your area. Also, it should be noted that the insurance commissioners’ opinion was published in 1995. That’s more than 20 years ago now, and a lot can change in that time. And of course, specific rules on such things can vary widely from one state to the next.
All that said, I’ll keep the bulk discounts limited to books. When it comes to my practice, fees are strictly per session.