Why employers should consider offering free telemedicine

Telemedicine has the potential to dramatically lower health care costs for U.S. employers, in fact, by as much as $6 billion annually, according to a Willis Towers Watson internal analysis from a year ago. But employees have been slow to adopt telemedicine. It’s new and different and they don’t yet know which medical issues are appropriate for telemedicine. With 67% of employers offering telemedicine today and 90% expected to by 2018, telemedicine will become ubiquitous. But it will take time.

Here’s one way employers can speed adoption and reap the savings possible from telemedicine right now: consider making it free.

Let’s do the math.

A nationwide analysis of outpatient emergency room visits found that the average cost of such a visit is $1,570. The average cost of an ER visit for a medical issue potentially treatable by telemedicine is somewhat less, about $900. An urgent care visit is typically around $155 and a visit to a primary care provider is around $114. Meanwhile, the average cost of a telemedicine visit is just $45.

With these kinds of per-visit costs, even if employers cover the full $45 cost of a telemedicine visit, they can save a lot of money – between $70 and $855 per visit. Apply the savings across an employee population of 1,000, 5,000 or 10,000 individuals, and you can see they quickly add up.

But there is something standing in the way of employers realizing these compelling cost savings. Telemedicine utilization rates today are far below their potential. Let’s look at those numbers.

According to a Willis Towers Watson analysis of U.S. employer claims data, the average patient needing primary care goes to see a practitioner in person, that is, in an office, urgent care clinic or hospital emergency room, 2.5 times per year. Our analysis showed that as many as 15%, or 0.375, of these annual in-person visits could be replaced by telemedicine visits – meaning that the medical issues that prompt these visits are appropriate for diagnosis and treatment electronically. (Some examples of medical issues that can be addressed using telemedicine include bronchitis, the common cold, urinary tract infections, skin rashes, allergic reactions and others.)

Despite the potential of telemedicine to replace in-person visits, we have found that the utilization rate of telemedicine is a small fraction (just one tenth) of the maximum 15% of all in-person visits. Which brings us to why employers should offer telemedicine to their employees for free.

According to a telemedicine vendor analysis, utilization rates when there is no employee co-pay for telemedicine are four times higher than when there is a $40 employee co-pay. In other words, the fastest way for employers to unlock the billions of dollars of potential savings from telemedicine is to offer it for free.

This does not mean that employees won’t eventually adopt telemedicine on their own – without the allure of free. They did with urgent care centers in the 1970s and retail health clinics in the mid-2000s. But it will take a lot of education from employers, and it will take time.

In the meantime, employers will be leaving billions of dollars of savings on the table every year.