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Many therapists wonder if it’s okay to charge one rate for insurance and another for private pay clients.
It seems simple. After all, insurance rarely pays your full fee.
But when it comes to fee-setting, there are ethical, legal, and even fraud-related risks to consider.
The short answer is that charging different rates for the same service based solely on whether a client uses insurance or pays cash is not allowed.
In this article, we’ll explore what the rules actually say, where the gray areas are, and safer ways to structure your fees.
When it comes to fees, ethics and perception matter just as much as compliance.
If two clients sit in your office for the same 50-minute session but are charged differently simply because of how they pay, that can raise questions of fairness. Charging different rates based on payment method can feel arbitrary or even discriminatory to clients.
Consistency also plays a big role in trust. When your fees are transparent and predictable, clients view you as a professional running a structured practice rather than someone improvising on the spot.
This kind of clarity can strengthen the therapeutic alliance and reduce the potential for conflict around money.
Within the therapist community, there’s a wide range of opinions on sliding scales and “pay what you can” models. Some practitioners see them as essential for accessibility, while others find they quickly become unsustainable or confusing.
Both perspectives are valid and highlight why fee policies should be well-thought-out rather than improvised case by case.
The key takeaway is simple: clear, consistent fee structures protect both you and your clients. They ensure fairness, minimize misunderstandings, and help you present yourself as both compassionate and professional.
Beyond ethics, there are legal realities that directly affect how you set and enforce your rates.
Insurance contracts: If you are paneled with an insurance company, you agree to specific rules about what you can and cannot bill. One of the most important things is that balance billing is illegal in many states. This is when a therapist charges their client the difference between their usual fee and the insurer’s contracted rate. Once we accept a contracted rate, that payment (plus any required copay or deductible) must be considered payment in full.
One fee schedule: Both CMS (Centers for Medicare & Medicaid Services) and the OIG (Office of Inspector General) stress that providers should maintain a single published fee schedule. Having two different fee structures, one for insured clients and one for self-pay clients, can look like misrepresentation and lead to compliance risks.
False Claims Act: This federal law prohibits submitting false or misleading information to insurers. If you routinely accept less from self-pay clients while billing insurers at a higher “official” rate, it could be interpreted as fraud. Even if your intentions are good, the inconsistency can expose you to liability.
What to do when insurance lapses: What happens if a client’s coverage is inactive or a claim is denied? In these cases, you’re generally allowed to charge your full self-pay rate. However, this should never come as a surprise to your client. The best practice is to spell it out in your intake paperwork: clients are ultimately responsible for fees if insurance does not cover the service. Clear communication upfront avoids uncomfortable billing disputes later.
Your Usual and Customary Rate (UCR) is the standard fee you publish for a specific service, such as a 50-minute individual therapy session. It’s the number you list on your paperwork, in your records, and often in the claims submitted to insurers.
Why does this matter?
Because insurers and auditors use your UCR to help determine reimbursement levels. If your published rate is $160, they work from that number when deciding how much they’ll cover. If your rates appear inconsistent, it can raise red flags about whether your claims are accurate.
A common risk arises when therapists offer undocumented, steep discounts to self-pay clients. While generosity is well-intentioned, repeated discounts can affect how your UCR is viewed. Over time, insurers may argue that your “real” rate is the lower one you frequently accept, not the higher one you bill. That discrepancy can create compliance problems and complicate reimbursement.
The safest approach: maintain one clear, published rate, and if you provide financial accommodations, document them under a structured sliding scale or hardship policy.
A dual fee schedule happens when a provider charges one rate for insured clients and a different rate for self-pay clients for the exact same service.
At first glance, this might feel practical: insurance companies rarely pay your full rate, so why not charge self-pay clients less?
But from a compliance perspective, dual fee schedules are considered a form of misrepresentation. They can void insurance contracts, trigger denials, or, in some cases, be seen as fraudulent billing.
This doesn’t mean you can never vary your rates. It is perfectly acceptable to set different fees for genuinely different services. For example:
The key is that rate differences should reflect differences in service type or length, not in whether a client uses insurance or pays cash.
Keeping that boundary clear will help you stay compliant, protect your contracts, and maintain professional credibility.
Many therapists want to make their services more accessible, and two common approaches come up: sliding scales and “pay what you can” models.
While both are rooted in good intentions, they carry different levels of risk.
Sliding scale. This is generally legal if it’s structured, transparent, and applied consistently. Most sliding scales are based on income or financial circumstances, with clear criteria for how much of a discount a client qualifies for. The key is documentation. If you’re ever audited, having written records of your sliding scale policy (and how each client’s fee was determined) protects you from being seen as arbitrary or discriminatory.
Pay what you can. This model is riskier. If clients pay whatever they choose, those payments may not qualify as your “published rate.” That means they might not be able to submit out-of-network claims, and you could face issues with insurers if it looks like you have no consistent fee schedule. For this reason, “pay what you can” tends to work best only for limited, reserved slots, such as for students or special hardship cases, rather than across your entire practice.
Best practice: Create a written sliding scale or hardship policy that you apply equally to all clients. That way, you can offer flexibility while maintaining compliance and protecting your professional credibility.
Even if you work mostly with private pay or out-of-network clients, the larger legal framework around Medicare and insurance fraud still applies to your practice. These laws set the baseline for what’s considered compliant billing and fee-setting.
Fraud vs. abuse: Fraud means intentional misrepresentation, like knowingly submitting false claims. Abuse refers to practices that bend rules or inflate costs even without malicious intent. Both carry serious consequences.
Key statutes to know:
Violating these laws can result in steep fines, penalties, exclusion from insurance networks or government programs, and significant reputational harm.
Even if you rarely bill insurance directly, these rules define what regulators see as “reasonable and compliant.” Fee-setting practices that look inconsistent, arbitrary, or misleading can put you at risk even outside of Medicare. Understanding these laws helps you avoid mistakes that could damage your practice.
Fee-setting doesn’t have to be complicated, but it does need to be intentional. A few best practices can keep you both compliant and confident:
By following these practices, you’ll reduce compliance risks, maintain fairness, and present your practice as professional and trustworthy.
Charging different rates for the same service depending on insurance status isn’t allowed and can expose you to both ethical and legal risks. The safer and more sustainable approach is to use structured tools like sliding scales, hardship policies, or differentiated rates for genuinely different services. And document everything.
Out-of-network and private pay practices thrive when their fee structures are transparent, consistent, and compliant. By setting clear policies and communicating them upfront, you protect your practice, support your clients, and strengthen trust on both sides of the therapy room.
If you’re ready to save time from insurance billing and earn more, allow Thrizer to support your clients with out-of-network claims.
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This blog post is provided for informational purposes only and is not intended as legal, business, medical, or insurance advice. Laws relating to health insurance and coverage are complex, and their application can vary widely depending on individual circumstances and state laws. Similarly, decisions regarding mental health care should be made with the guidance of qualified health care providers. We strongly recommend consulting with a qualified attorney or legal advisor, insurance representative, and/or medical professional to discuss your specific situation and how the laws apply to you or your situation.
