As we find ourselves in the early majority stage of the adoption process for telehealth, we must evaluate the various approaches being promoted to determine which actually provide better access with reduced costs. Key terms must be properly defined to provide a level field in the evaluation process. Some approaches to the solution may be more effective than others.

The Healthcare Performance Management Institute has reported that 70% of doctor’s visits and 40% of ER visits could be handled with a telehealth consult. Telehealth plans that allow patients to consult with doctors without visiting them in office have been shown to reduce healthcare costs, the institute found. These facts have resulted in telehealth plans being integrated as a PEPM item in major health insurance providers’ plans and as a voluntary benefit for employers and employees. But is the PEPM model really a cost effective way to provide telehealth access to an employer’s workforce?

Bloomberg/file photo

Also see:5 top-grossing large-group brokerages in each state, part 1.”

First, we must understand the term “utilization” and its impact on costs when employed by insurers and telehealth providers. For example, a plan to provide telehealth access for 100 employees on a PEPM basis might cost $7.00 per employee per month and allow for 20% utilization. Gary Capistrant, chief policy officer at the American Telemedicine Association stated that while individual insurers may have a more specific definition, within the industry, a unit of utilization would be a single telehealth consult per year.

Dissecting the numbers
With the 20% utilization cited above, a business with 100 employees and a 20% utilization rate would be allowed 20 telehealth consults in a year’s time. If the plan included coverage for family members, this could mean the 20 consults would be spread across 250 to 350 individuals. So what is the cost per consult in this PEPM model? The employer costs for telehealth at a PEPM rate of $7 a month times 100 employees would be $700 per month, while an annual payment of $700 PEPM times 12 employees would be $8,400 per year.

Now that we understand the definition of utilization we can determine the number of consults authorized under the plan. With a utilization rate of 20% times 100, that would equal 20 consults.

If full utilization of 20 visits under the PEPM structure is achieved, an employer would be paying $420 per telehealth consult. Currently, an average utilization rate, nationally, among employees who have access to a telehealth policy is only 7%. At this level of engagement the cost per consult paid by the employer climbs to an incredible $1,200 per consult.

Also see:5 top-grossing large-group brokerages in each state, part 2.”

The high costs of telehealth consults under a PEPM model does not negate the fact that an effective telehealth policy with utilization in the 20-30% range can significantly avoid more serious healthcare expenditures. Recent studies demonstrate that programs with utilization in this range will avoid an average of one ER visit for every 10 telehealth consults, according to the University of Rochester Medical Center. With ER costs to the employer starting at $2,500 per incident, one could calculate a savings of $250 per telehealth consult. This could mean that our $8,400 is offset by $5,000 of avoidance savings. Can the employer do better?

A “pay as you go” plan may offer a more effective use of corporate healthcare dollars. These plans provide employees telehealth consults for a fixed fee of between $40 and $75 per consult.

A flat rate consult of $40 for the pay as you go model would work out to be $8,400 divided by 40, equaling 210 consults. At a rate of $75 per consultation it’s $8,400 divided by 75, which equals 112 consults.

For the same employer expenditure as our sample PEPM plan, and employees and family members could receive 5-10 times the number of consults. Taking the lower number, if all were utilized (112% utilization rate) the ER avoidance costs would be about $ 28,000 providing an ROI in excess of 200%. If you or your client’s company is paying for a PEPM policy for telehealth access, it might be effective to consider a plan built on the pay as you go model.

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