A complete guide to raising your rates (for counselors)

Question: When should I raise my counseling rates?

I recently got a question that went something like this:

Hey Jordan,

I know you run Private Practice Incubator (PPI) where you help counselors launch their practices.

I've got a practice building question.

I’m wondering if I should raise my rates. I'd like to charge about $200, but I don’t know what the industry standard is. I currently accept insurance, so raising my rates won’t impact most of my clients, but I’ve been listening to podcasts about how we should be raising our rates, especially with my training and experience. So yeah, any thoughts would be helpful!

-AF

Answer: Private Practice Incubator's view on raising your rates (as a counselor)

Hey AF,

Great question! We've got a lot of thoughts on how and when counselors should raise their rates. In order to give you the best answer, first let's talk about what industry standard.

Nationwide Industry Standard Rates

First, the industry standard depends on your area. A few years ago, Simple Practice published a study on insurance reimbursement nationwide. What they found was, in general, there were three tiers:

Low-paying states with the average insurance rate around $90
Medium-paying states with rates around $120
High-paying states with rates around $150

Now, this study was done in 2018, so it’s old at this point. However, I doubt most people have seen much change in insurance reimbursement since then. Also this is all averages. Even in the same state different insurances can pay vastly different rates. One example of this is medicaid. In many states medicaid pays closer to the $90 while private insurance pays closer to $150.

So even within states there can be lots of variability. Still, I think we can use these benchmarks to set “industry standard” expectations.

Because of the data, if you’re accepting $90, then it’s definitely possible to run a practice charging $120 or $150. Go for it. And remember, these numbers are averages. If you’re in a high-income state, you could charge much more.

The Problem with “Charge Your Value” Podcasts

This leads to my conflicted feelings about these therapy “charge our value” podcasts.

On the one hand, these podcasts are good for mindset shifts.

One of the most shocking things I’ve discovered since coaching therapists to launch their practice is that the biggest barrier for most therapists isn’t skills; it’s mindset. We get squeamish marketing ourselves, we avoid talking about money, we look down on those who run successful businesses.

These podcasts combat these negative beliefs about us and our businesses. So they are super helpful.

On the other hand, I’ve also seen them set unrealistic expectations.

The biggest problem with these podcasts is they talk about how much therapists “ought” to be charging based on “years of experience and training.”

This idea that you should charge based on years of experience and training falls what we call the "Uncle Joe test."

If your Uncle were to call a therapist, would he know the difference between an LAMFT, LPC, EMDR-II, Ph.D., and a Gottman-trained therapist?

Probably not. He won’t understand the difference between a degree, certification, and license. Which means he’s not going to value it.

Most people calling our phones don’t know either.

The disappointing news is credentials don’t really matter to potential clients. So charging more because of these credentials will only lead to a lot of people turning you down.

Also, charging higher rates will cause many clinicians to stop referring to you.

My rate used to be $325 for 80-minute sessions. I talked to several other clinicians, friends of mine, about referrals, and, in the nicest way possible, they all said, “Jordan, my clients can’t pay that rate. There’s no way. So I can’t refer to you.” I’ve also referred clients to $300 therapists, and, even clients who I know can pay, dual-income high earners, balk at the price.

Of course, that specific number is region-specific. I know clinicians in California who charge $240. Still, the principle holds. Ultra-high rates will turn away clients, and some clinicians will stop referring to you.

I think these “charge your value” podcast are actually speaking to a very small group of clinicians who are in high cost-of-living states (like California) but are accepting a low reimbursement rate ($90). In situations like those you can of course raise your rates quite easily.

With all that being said, we have four rough tiers of therapy rates.

Low - around $90
Medium - around $120
High - around $150
Ultra high - $200+

Strategies for Raising Your Rates

So if you want to raise your rates, how do you do it? In PPI we have two strategies for raising rates. You can choose.

Strategy 1 - The Leapfrog Strategy

Strategy one is favored by my business partner. It’s to start out charging higher rates ($150 and up).

Let’s say in your area insurance reimbursement is on the low side. For simplicity, we’ll say $75. And let’s say you decide to set your fee at $150.

At those rates, you’re making twice as much money, seeing half as many clients. Ten clients at $75 are worth five at $150. So you need fewer clients to run your practice.

But it’s actually better than that, because you not only need fewer clients, you also gain five hours of your time. Which is desperately needed when you’re starting a business. In Private Practice Incubator (PPI) we’ve seen more than a few businesses which are half-baked because the clinician is too busy seeing clients to fully flesh out their business. I’m sure you've seen them too. They’re the people who are seeing 30 clients a week, but haven’t done notes in a month and have a year's worth of back billing to submit to insurance.

So to summarize, the leapfrog strategy is helpful because:

You make the same amount of money
With fewer clients
Which gives you time to work on your business

I think of it as a 3-for-1. One higher-paying client is worth three low-paying clients.

However there’s a downside. You have to actually have clients calling your phone. It doesn’t matter what your rate is if no one’s calling your phone. So you have to use your extra time to increase your marketing.

Strategy 2 - The Scaffolding Strategy

The second strategy is more of a scaffolding approach. I prefer this approach.

You start out low, and as you get full, you ratchet up your rates.

So you start off charging $90, and once you’re full, and here’s the key part, have more calls than you can handle, then raise your rates to $120. Then once you’re full at $120 raise your rates to $150 and just keep going until you reach the max for your area.

To me, this is a safer approach because you’re always raising your rates from the position of having a full caseload.

What we’ve found in PPI is that the bottleneck for most clinicians starting out is just getting clients. The scaffolding strategy lowers the barrier to entry for clients.

A lot of these podcasts talk as though all clients will pay your higher rates if you’re confident enough or well-trained. That’s simply not true. It’s much easier to fill a practice if you have lower rates. Trouble is, lower rates aren’t sustainable. Hence ratcheting up whenever you have more people asking for your services.

The downside of this strategy is many clinicians really struggle to raise their rates, especially on existing clients. It can feel like you’re hurting people who are depending on you. And you will lose some clients. So for some therapists it’s emotionally easier to just start out charging higher rates.

The Bigger Question

So those are two strategies for raising your rates. You can leapfrog there or scaffold your way there. It’s up to you.

Honestly though, I don’t think these are the most important questions.

The bigger issue is what you do about the low paying EAPs and insurances. In PPI, we find that most clinicians and practices lose money not on their cash pay clients, but on their low-paying insurance and EAPs. Cut these and focus only on the ones that pay well. Oftentimes that alone will dramatically increase your income.

For example say you have a caseload of 21.

7 pay $90, 7 pay $120, and 7 pay $150. That means you’d make $10,080 per month or $115,920 per year [1,2].

Then let’s say you cut out your low paying clients and replaced them with medium paying clients.

So you’d have 14 clients paying $120 and 7 paying $150. That means you’d make $125,580 per year.

That’s a ten grand difference.

If you cut out your low paying clients again you'd have a caseload of 21 clients who all pay $150. At that rate you'd make $144,900 per year.

Should I Raise My Rates?

With all that being said, I think you have to raise your rates for one simple reason: cost of living.

This is a complicated topic, but it’s worth noting.

The government has a policy of devaluing our money by 2-3 percent each year. This doesn’t mean people make less money. Rather, our money buys less stuff every year. They call this inflation. The government does this because if your money buys less stuff, then you’ll need to keep working to earn more money. And the more you work, the more you produce and the more the economy as a whole grows.

The government is also pretty bad at managing inflation.

I think we’re all feeling it. So even though they target 2-3% inflation, in the past few years it’s been much worse. Since 2020, it’s been 19%. So if you lived in a low-paying state and made $90 per session in 2020, it can only buy you $73 worth of stuff. Which is why things feel so expensive right now.

This is why traditional companies give employees annual “cost of living raises.” It’s not actually a raise. When our money buys less, you have to earn more to stay in the same place.

We need to be raising our rates for the same reason. We have to raise our rates 2-3% per year at a minimum, otherwise, we’re essentially giving clients a 2-3% discount every year.

To me, this is the sneakiest part of working with insurance companies. Insurance premiums go up regularly, but providers don’t get raises every year. Instead, more money just goes to the people at the top.

How to Tell Clients About a Rate Change

This is the question people ask the most, but it’s actually the easiest part. You just send them an email saying you’re raising rates in 30 days. I think we struggle with wording not because it’s hard, but because we’re afraid. It feels like we’ll have to sit down a starving mom and say “I can’t see you anymore unless you pay me more money.”

But you don’t have to raise rates on current clients. You can just raise rates on all incoming clients. I’ve done both. It’s totally up to you and your values.

Let’s not avoid the issue because it makes us anxious. Make a decision and follow through. If you want wording I really like this guys’ take.

I've also included a form letter at the bottom of this post [3].

In PPI, we train clinicians on how to talk about rates using role plays. At first, it’s always nerve-wracking, but after doing it a few times, and nothing bad happening, clinicians become quite comfortable. So just know, if you struggle, it gets easier after a few repetitions.

Pulling This All Together

So if we pull all of this together, we get:

At a minimum, you should raise your rates once per year by 2-3% to match inflation. This is a basic cost-of-living raise.
For most clinicians, cutting the low-paying EAPs and insurance will significantly raise their average rate.
Set your expectations around $90-$120-$150. If you’re on the lower end, you can reasonably expect to raise your rates and still have a healthy practice.
Be aware that the biggest barrier to raising rates is mindset.
If you try to charge ultra-high rates, you will drive clients away. The exact number for what defines an ultra-high rate will depend on your area.

So that’s my answer to your questions. If you have any other questions, reach out.

One final thing: the goal of a private practice is to make money and help people. So look within yourself, think deeply about your community, and make the best decisions for you and your needs.

I know you’ll do what’s best for you.

Best,

Jordan (the counselor)

-Fin-

{Notes}

[1] Assuming a 46 week work year.

[2] This is of course revenue, then you’d need to pay taxes and expenses.

[3] Dear clients,

I hope you're doing well! I am writing to inform you of some important business updates to my practice.

First, I want to express my sincere gratitude for entrusting me with your counseling needs. It is my privilege to work with each of you, and I appreciate the trust you place in me.

After thinking about it a lot I've decided to raise my rates. For me to continue to provide you with the best possible care I need to raise my prices. This means effective January 31st the new hourly rate will be $150.00 for all private pay clients.

I know for some of you this may come as a shock, I hope to also discuss any questions you may have in our next session. If this materially impacts your daily finances please let me know and we'll work something out.