Physical therapy (PT) is a healthcare service designed to restore, maintain, or improve a person’s movement and function after an injury, illness, or surgery. PT often involves therapeutic exercises, manual techniques, and patient education. Health insurance typically covers physical therapy, but the extent of that coverage varies significantly. Your financial responsibility and administrative requirements depend entirely on the specific details of your health insurance policy.
How Physical Therapy Coverage is Structured
The financial obligation for physical therapy falls under your health plan’s cost-sharing structure, which determines what you pay out-of-pocket and what the insurer covers. This structure involves three primary financial terms: the deductible, copayment, and coinsurance.
The deductible is a set amount you must pay annually for covered healthcare services before your insurance company contributes to the costs. For physical therapy, you pay the full contracted rate for each session until this annual threshold is met. Once the deductible is satisfied, your plan’s coverage begins, and you transition to paying either a copayment or coinsurance.
A copayment (copay) is a fixed dollar amount paid for each visit, regardless of the total service cost. Coinsurance, in contrast, is a percentage of the total allowed cost that you are responsible for paying. For example, if your plan has 20% coinsurance, you pay that percentage of the bill, and the insurer covers the remaining 80%.
A major factor influencing cost is whether the provider is in-network or out-of-network. In-network providers have negotiated discounted rates with your insurer, resulting in lower copayments or coinsurance. Seeking care from an out-of-network therapist almost always results in higher costs, as fewer services are covered or the benefit is paid at a lower rate.
Mandatory Steps Before Treatment
Even when physical therapy is a covered benefit, insurance companies impose administrative steps before treatment can begin. One common requirement is obtaining a physician referral, which is a recommendation from your primary care provider to see the specialist. Health Maintenance Organization (HMO) plans frequently require this referral, while Preferred Provider Organization (PPO) plans may not.
The referral ensures the therapy is considered medically necessary by a physician, but it does not guarantee payment. The separate process of pre-authorization, or prior authorization, is typically required for physical therapy services. Pre-authorization is formal permission from the insurer confirming the service is covered under your plan and meets their specific necessity criteria.
The physical therapy clinic must submit documentation, including diagnosis and treatment codes, to the insurer for review. If pre-authorization is not secured, the insurance company will likely deny the claim, making the patient responsible for the entire cost. Failing to follow the referral or pre-authorization process is a major reason for claim denial, even for a covered service.
Limitations on Care
Once initial treatment is authorized, insurance plans often place limitations on the quantity and duration of physical therapy services. Many plans utilize annual visit caps, limiting the total number of sessions a patient may attend within a calendar year (e.g., 20 visits). Once this cap is reached, the patient must pay the full cost for any additional sessions, unless the insurer approves an extension.
Beyond visit limits, all coverage is subject to “medical necessity,” the central factor in determining continued treatment. Insurers define medical necessity as treatment that is goal-specific, evidence-based, and essential for diagnosing or treating a specific health condition. Therapy for general wellness or convenience is not considered medically necessary and will not be covered.
Insurance companies use utilization review to assess if continued therapy is warranted. This involves reviewing the therapist’s documentation, which must show objective measurements of improvement, functional gains, and specific goals. If the patient’s progress plateaus, or the documentation does not justify the need for skilled intervention, the insurer may terminate coverage, arguing the treatment is no longer medically necessary.
Differences in Government-Sponsored Plans
Government-sponsored programs like Medicare, Medicaid, and TRICARE have distinct rules for physical therapy coverage compared to private insurance plans. Medicare Part B covers outpatient physical therapy services in various settings, including a therapist’s office or an outpatient facility. After the yearly Part B deductible is met, the beneficiary is responsible for 20% of the Medicare-approved amount, and Medicare covers the remaining 80%.
Medicare does not have a fixed dollar limit on how much it will pay for medically necessary outpatient therapy in a calendar year. However, once the cost of services exceeds a certain annual threshold, providers must document that the continued therapy is medically necessary using a specific billing modifier. This annually adjusted threshold triggers a more intense review process to prevent payment for services that do not meet the necessity standard.
Medicaid coverage for physical therapy is generally robust, but specific benefits and visit restrictions vary significantly by state. Many state Medicaid programs require prior approval before services begin and may impose limits on the number of covered visits. TRICARE covers physical therapy for military service members and their families when provided by authorized providers. TRICARE beneficiaries may need a referral or authorization from their primary care manager, and the plan excludes coverage for general exercise programs or maintenance therapy.