Catalyst for Payment Reform

Virtual-First Health Plans: What to Know Before Taking the Leap

Virtual-First Health Plans: What to Know Before Taking the Leap

Before the pandemic, the use of telemedicine was steadily increasing as a care modality, but still faced regulatory, payment, and logistical challenges that hindered its widespread adoption. But when the world shut down due to Covid-19, people still needed a way to connect with their healthcare providers. As a result, demand for telemedicine skyrocketed, providers offering virtual care multiplied, and Congress passed “payment parity laws” , making it financially viable for providers to connect with patients in a virtual setting. In the post-pandemic environment, virtual care continues to be a popular choice. Providers must now offer telehealth to stay competitive, and national health plans often partner with multiple digital health providers to supplement their brick-and-mortar networks. 

Enter the next evolutionary phase for telehealth: digital-first health plans, which encourage or require patients to seek virtual care for non-urgent circumstances, and use in-person care only as needed. These types of plans claim to increase access, reduce costs, and deliver better quality care, but the question is whether they will deliver. 

To begin, let’s discuss virtual-first plan products.  There are clear upsides to virtual care, which exist with or without a virtual-first plan: Virtual care can lower barriers to preventive care and condition management, especially in geographies with limited public transportation and/or provider shortages.  In a similar vein, telehealth can boost health equity by providing better access for individuals to culturally sensitive care and help overcome language barriers where in-person options don’t exist.  But these advantages persist with or without a virtual-first plan. 

A virtual-first plan promises lower premiums and co-pays on top of the native benefits of virtual care, and it’s worth unpacking how the mechanics work.  One theory, that virtual-first plans save money because the price per visit of telehealth is lower, doesn’t hold much water.  After all, 32 out of 50 states have payment parity laws in place that require equal payment to providers for in-person or virtual visits.  If a health plan contracts with an exclusively virtual network, payment parity laws do not apply, and some health plans have negotiated lower prices with virtual-only provider practices. But that said, considering that primary care spend ranges from 3.5% to 8% of total medical spend, marginally lower-cost primary care is unlikely to produce significant savings overall.  The cost of care savings from virtual-first plans actually derives from a different (and somewhat surprising) source: tighter control over referral channels. Virtual-first plans offer health plans more control over where PCPs direct patients for specialty and tertiary care, disrupting the hard-wired referral patterns that may be entrenched in a brick-and-mortar environment, and channeling patients into a lower-cost and/or high-performing network of specialists and hospitals. But this only works if the health plan has a dedicated network of virtual-only providers; in a hybrid setting, it might be harder to change established referral patterns.  What’s more, this theory of cost savings relies on a de facto gatekeeper model, a product which has fallen out of favor with both purchasers and their plan members.

So, at the end of the day, a virtual-first product starts to look like a gate-keeper HMO wrapped around a new(ish) care modality that consumers would have access to regardless.  Perhaps it shouldn’t be a surprise then, that they don’t seem to have gained much traction in the marketplace. Also, although telehealth offers the potential of improved health equity, it also requires technology that is still out of reach for many Americans. While the digital divide is rapidly closing, an estimated 14.5 people are still without access to broadband and only 83% of rural households have access.   

Purchasers considering whether a virtual-first plan is a good fit for their plan participants should assess the following before taking the leap:

  1. What criteria does the plan use for referring patients to in-person care?
  2. What is the compensation model for providers in the virtual-first plan? How does the plan hold virtual providers accountable for cost of care, quality, and efficiency? 
  3. How does the virtual-first plan ensure/facilitate care coordination and data sharing between virtual and traditional providers?
  4. How does the virtual-first plan leverage benefit design to encourage appropriate use of virtual care?

A final and critical point of consideration is how the health plan will measure outcomes from its virtual-first product, and guarantee that savings derived from actual improvements in quality and efficiency instead of advantageous selection.  After all, it’s most likely to be young, healthy plan members who are comfortable with technology and unlikely to interface regularly with the delivery system who will be most attracted to a virtual-first product.

CPR’s Marketing and Operations Manager, Torie Nugent-Peterson wrote this blog post.

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