Cash-Pay vs Insurance: Which Is Better For Your D2C Telehealth Program?
A high-level overview of cash-pay vs insurance billing models for D2C leaders
If you’re thinking about launching a D2C telehealth program or already have one, you likely wonder how you should bill for virtual services. Should you go the traditional route, where you take a patient’s insurance, or only accept direct payment?
Truthfully, there’s no one-size-fits-all answer, as it ultimately comes down to your unique business model. However, the best way to determine what your company should do is by weighing the advantages and disadvantages of both.
To help you decide, we’ll examine the pros and cons of cash pay vs. insurance. So, keep reading to get a quick overview of how each of these billing methods may work with your D2C telehealth program.
The pros of insurance and D2C telehealth
Accepting health insurance has a few perks. Once you enter into a contractual agreement with an insurance company, here are some of the advantages you can expect:
Large referral network
One of the most significant benefits of being credentialed by insurance carriers is being added to their in-network provider list. For example, with point of service (POS) and HMO insurance plans, patients pay less if they go to providers in their plan’s network. Therefore, if your virtual care company is in-network when primary care providers send a referral, those patients may come to you. These are customers you otherwise may never have reached.
More consistent patients
With a patient's insurance covering part or all of the costs, it’s more likely that patients will remain consistent with their treatment plan. Studies even show a consistent and positive relationship between health insurance coverage and health-related outcomes.
So, if a patient is expected to get ongoing mental health visits, for instance, they’re more likely to maintain that regimen if money isn’t a factor. This is great for them and your telehealth program's bottom line.
Accessibility
According to a Census survey, 92% of individuals in the United States in 2023 had health insurance for some or all of the year. Therefore, by accepting several carriers, your company may be accessible to more people, especially those who are low-income or in rural areas.
Most patients only visit providers who accept their insurance plan, making it a path of least resistance for client acquisition.
The cons of insurance and D2C telehealth
Now that we’ve covered the good, let’s address some of the challenges. After all, accepting this form of payment isn’t as simple as flipping a switch.
Credentialing
Companies that plan on billing an insurance company must ensure their providers are credentialed. This complex and time-consuming process can easily take 60 to 90 days (or more) to complete and requires ongoing review of provider privileges.
Administrative processes
Accepting insurance also means taking on the administrative tasks that come with it. This includes submitting, tracking, and disputing claims, resolving billing issues and more. This inevitably cuts into the time providers spend caring for patients or requires hiring more administrative staff to tackle those to-dos.
Charting guidelines
D2C telehealth programs that accept insurance have to document patient encounters in a way that aligns with a patient's insurance plan. That involves clearly defining medical necessity for healthcare services. While good documentation is important for proper record keeping, it can be time-consuming, especially since different carriers require different things.
Prior authorization
Insurance companies control costs by requiring prior authorizations, and without them, patients won’t get coverage. This inevitably can delay care because patients can’t utilize your service until it’s approved.
Rate setting
Usually, the insurance companies set service rates, which may make less economic sense for some D2C telehealth programs.
The pros of cash pay and D2C telehealth
We’ve covered the benefits and disadvantages of the insurance model. Now, let’s move on to the pros associated with cash-pay for D2C telehealth companies.
Fewer employees, lower overhead
You can significantly simplify billing if you don’t align with insurance companies. D2C telehealth companies can operate with fewer virtual office managers and administrative assistants because there’s no need to have someone navigate insurance policy nuances. As a result, you end up with decreased overhead expenses.
Straight-forward charting
With a private pay telehealth company, you can create your own charting guidelines. A D2C telehealth business should still ensure they’re documenting sufficiently, but they don’t have to base their documentation on what Medicaid, Medicare, or other insurance companies dictate.
Financial independence
By going cash-based, companies have more control over rate setting and managing their income, which could lead to larger profits in the long run.
There are cost efficiencies for patients, as well. Virtual care sessions are often used for low-acuity treatment and tend to be less expensive than in-person visits due to reduced overhead costs. In fact, some of these visits are more affordable than one’s insurance co-pay, making cash-pay an attractive option.
No payor telehealth limitations
Telehealth coverage varies by state and insurance provider, with some states and plans imposing very strict limitations or exclusions. These restrictions can make it challenging for D2C telehealth companies to expand their patient pool nationwide using insurance. Cash-based models are a more practical solution for those looking to bypass state-specific laws and insurance plan obstacles.
Treatment flexibility
Many patients and providers prefer cash-based practices because they don’t have to worry about pre-authorizations or treatment restrictions. Therefore, D2C telehealth companies may be attractive to those who desire convenience and customized treatment plans without session limits.
Remember, virtual care is meant to improve accessibility. It allows patients to avoid care delays that lead to preventable harm. This method also gives patients more control over their healthcare, with surveys showing that patients want more involvement in their healthcare decisions. Ultimately, private pay better permits that.
The cons of cash pay and D2C telehealth
Going cash-based may also present some challenges. Below, we’ll discuss a few that you should keep in mind.
Potentially reduce patient pool
If you started off accepting insurance and then removed it, it’s likely that some of your patients who rely on in-network insurance coverage will choose a different virtual care solution.
Difficulty attracting new patients
Patients with insurance are less likely to seek a provider that isn’t in-network. Most are unwilling or don’t have the financial means to pay completely out-of-pocket. Therefore, you’ll wind up with a smaller patient population. Plus, you don’t benefit from the referral stream tied to being in-network with insurance companies.
Requires more strategic marketing
Without insurance referrals, you’ll have to rely on marketing your telehealth services in different ways, which can get expensive. To be successful, virtual care companies have to figure out how to communicate why patients should come to their business rather than one that takes their insurance.
Cash pay vs. insurance for virtual care
When it comes to cash pay vs. insurance for operating a D2C telehealth program, you really need to align it with your business model and the organization’s long-term goals. Depending on the goals, some of the pros and cons listed above may not fully align with you. In addition, with the right strategy, recognize that it may also be possible to do both.
If you're feeling overwhelmed and looking to connect with experts who specialize in scaling D2C organizations, OpenLoop is here to help. . We have solutions customized to meet your needs, whether you’re going with a cash-pay business or opting for the insurance model. With our nationwide network of PC groups, over 600 insurance partners and a dedicated team of experts, we tailor solutions to fit each client's unique needs.
Ready to learn more? Chat with us today!
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