Telemedicine: Controlling the Rising Cost of Health Insurance

Telemedicine: Controlling the Rising Cost of Health Insurance

Telemedicine: Controlling the Rising Cost of Health Insurance

With greater acceptance of the “consumer driven” healthcare model by employers and employees, many additional benefit enhancements are being considered. The following article is a general overview of the history and application of telemedicine, written by two graduate students enrolled in the Florida State University Dr. William T. Hold/The National Alliance Program in Risk Management and Insurance. Future issues of Resources will address benefit topics from the carrier, producer, and academic perspective.

Employee benefit plan premiums are on the rise. Over the last decade, plan premiums have skyrocketed and in 2017 healthcare premiums are anticipated to increase another six percent, putting stress on employers and employees throughout the United States (Miller, 2016). There are a variety of strategies being considered by employers to manage cost including encouraging consumerism, implementing wellness programs, and utilizing technology. Though there is evidence of the use of telemedicine as early as 1950, and the use of telemedicine has increased dramatically in recent years.

What is Telemedicine?

Telemedicine, which literally means “healing at a distance,” increases patient access to care and medical information by using modern information and communication technologies (ICTs), such as computers, the Internet, and cellphones (World Health Organization, 2010). It was first suggested in April 1924 on an imaginative cover for the magazine Radio News, depicting a “radio doctor” consultation with a patient not only by sound but also by a live picture, using the interactive video applications in telemedicine (Field, 1996). Today these applications overcome geographical barriers and provide clinical support using various types of ICT to improve health outcomes.

Early Uses of Telemedicine

The first reference to telemedicine in the medical literature appeared in 1950 when the transmission of radiologic images by telephone between West Chester and Philadelphia, Pennsylvania (a distance of 24 miles) was described (cited in Field, 1996). In 1959, clinicians at the University of Nebraska used two-way interactive television to transmit neurological examinations across campus to medical students, and later in 1964, they established a telemedicine link with the Norfolk State Hospital (about 112 miles away) to provide speech therapy, neurological examinations, psychiatric case consultations, and education and training between specialists and general practitioners (Field, 1996). To assist in urban emergency and urgent situations, Massachusetts General Hospital (MGH) established in 1963 a telecommunications link with a medical station staffed by nurse clinicians at Boston’s Logan Airport (cited in Field, 1996). Using a two-way microwave audio/video link, the hospital physicians were able to provide medical care to airport-goers 24 hours a day (Allan, 2006). Further, in 1965 a ship-to-shore transmission of electrocardiograms (ECGs) and x-rays was reported (cited in Field, 1996), and in 1967, voice radio channels were used to transmit electrocardiographic rhythms from fire-rescue units of the City of Miami Fire Department to physicians at the Jackson Memorial Hospital (Field, 1996).

Several federal agencies including the U.S. Department of Health, the Department of Health and Human Services (DHHS), and the National Aeronautics and Space Administration (NASA) supported and initiated various other telemedicine applications in the 1960s and 1970s, one of which was STARPAHC (Space Technology Applied to Rural Papago Advanced Health Care) in 1972. The program, sponsored by the U.S. Indian Health Service, NASA, and the Lockheed Missiles and Space Company, used satellite-based communications to provide medical services to astronauts and to residents of Arizona’s Papago Indian Reservation (Field, 1996). The mobile support units (vans) in rural Tohono O’odham reservation linked patients with physicians in Indian Health Service hospitals located in Tucson and Phoenix. The program lasted until 1975 (CDW Healthcare, 2016; Allan, 2006).

Technological Advances and Telemedicine

The high transmission costs were a major reason for the fading interest in telemedicine in the early and mid-1980s; however, with lower costs and improved technologies (with the rise of the internet allowing support for practically all information and traffic needed for telemedicine), the interest began to revive in the early 1990s (Field, 1996; CDW Healthcare, 2016). To stimulate the adoption of electronic health records (EHR) and supporting technology in the United States, the Health Information Technology for Economic and Clinical Health Act (HITECH Act) was created and signed into law as part of the American Recovery and Reinvestment Act of 2009 (ARRA) economic stimulus bill (Rouse, 2014). After the Centers for Medicare and Medicaid Services (CMS) published the final rule on “Meaningful Use” of EHRs in 2010, which offered healthcare providers financial incentives for using EHRs, the adoption of EHR was complete and knowledge of telemedicine began to grow. Even the Patient Protection and Affordable Care Act (PPACA) made use of telemedicine and remote monitoring through the formation of Accountable Care Organizations (ACOs), which are groups of doctors, hospitals, and other healthcare providers, who voluntarily give coordinated care to Medicare patients (CDW Healthcare, 2016). The uses of telemedicine will continue to grow as the majority of providers rank telehealth as a top priority in 2016 (CDW Healthcare, 2016).

Telemedicine in Everyday Use

So, what does all of this mean for everyday people who are looking to telemedicine to improve the way healthcare is accessed and received? As you can see, the category of telemedicine is vast and encompasses many types of technology and services. From the employee benefit perspective, let us consider the telemedicine software available for everyday use through mobile devices like cellular telephones and computer tablets.

Telemedicine software is readily accessible to download, usually at no cost to the consumer, and provides a much more efficient way of treating many common illnesses than the typical approach of going to a doctor’s office, urgent care, or the emergency room. Once downloaded, the application allows for a request to be sent to a physician for a consultation, after which a physician contacts the patient via video conference for the same face-to-face element of treatment as would be provided through conventional methods. The best part is that the response times average at 30 minutes or less with an average cost of less than $50 (VSee, 2017). With the average cost of a trip to the emergency room coming in at $1,233 and average wait time being four hours, there is no question that the telemedicine software provides an appealing alternative (Barron, 2013).

Benefits of Telemedicine

The two most significant potential benefits of telemedicine for employers are the reduction in lost time due to illnesses and the reduced healthcare costs that come with product changes made possible by telemedicine services. Forbes magazine reports that an estimated $227 billion per year is lost solely from a loss of productivity due to employee illness absenteeism (Japsen, 2012). Allyhealth, a telemedicine provider, reported in 2013 that 90% of the calls they received resulted in a diagnosis and treatment and that approximately 53% of those patients would have had to see a doctor to be treated without the availability of their telemedicine software. This not only saved the employee time and money, but the employer did not have to lose the productivity of the employee for the time needed to see the doctor. Allyhealth also states that employers can see 100% return on investment (ROI) with as little as 15% to 20% employee utilization (Whelpley, 2014). While telemedicine does not eliminate the need for sick days entirely, it does reduce the time needed to consult a physician and makes it more likely that sick employees will in fact seek medical treatment, which will in turn likely reduce the duration of the illness all together. This can only be beneficial for both the employee and employer.

The use of telemedicine to reduce loss of productivity is a direct benefit, but the indirect benefit of being able to use it to reduce the overall cost of the employer’s healthcare package is worth noting. Pairing a health savings account (HSA) with a high-deductible health plan (HDHP) is a popular choice among employers as it reduces premiums; as with most types of insurance, increasing the deductible will accomplish this goal of premium reduction. The disadvantage of this of course is the potential out-of-pocket expense the deductible creates. Telemedicine appears to be the perfect solution to this problem. Not only does it allow for the employer to utilize the premium savings associated with the HDHP, but the telemedicine copays are covered by the HSA tax-free (Bradley, 2017). When employees are faced with having to incur the expenses involved in seeking medical treatment and time off at work, many of those employees will simply opt not to seek treatment at all. Going without necessary medical treatment is just simply not a healthy, effective, or efficient option. Telemedicine is great not only for filling coverage gaps, but also for offering a realistic solution for employees to seek the care they need.


Given these points, will the use of telemedicine help to control the rising cost of health insurance? The use of telemedicine is still quite low statistically, but based on early indications and impressive statistics, it may very well be what helps turn our struggling healthcare system into a more cost-effective, efficient, and patient-friendly healthcare system. The following statistics published by one telemedicine provider are encouraging: After telemedicine services were employed by the Veterans Health Administration post-cardiac arrest care program, hospital readmissions decreased by 51% for heart failure and 44% for other illnesses.

The Geisinger Health Plan study found that implementation of a telemedicine program generated about 11% in cost savings during that study period. This led to an estimated ROI of about $3.30 in cost savings for every $1 spent on program implementation. (Iafolla, 2015)

Employee benefits demonstrate that an organization values its employees and is willing to invest in them and their health. Engaged employees can participate in wellness programs, resulting in healthier employees and reduced healthcare costs. Even the healthiest employee will experience an illness, but with the aid of telemedicine, employees will have fewer trips to the doctor which allows more time working in the organization. Telemedicine saves both the employer and the employee time and money, and ultimately allows the employees to bring their best selves to work every day; achieving the organization’s overall goal and objective.


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About the Authors: Jamie Moser Smith, CIC, and Jennifer G. Schul

Jamie and Jennifer are both FSU graduate students working toward their Master’s Degrees in Risk Management and Insurance. Jamie began in the insurance industry 18 years ago as a teenager working in her father’s insurance office in central Florida. Throughout that time she has worked in both captive and independent agencies, started a family, and worked to build her own book of business. Jennifer is the Deputy Director of Property & Casualty Product Review for the Florida Office of Insurance Regulation. She earned her undergrad degree in Actuarial Science and Statistics from FSU and began her career with the Office in 2007 as an Actuarial Analyst in the Dwelling Fire and Homeowners area and was promoted to Senior Actuarial Analyst in 2010, and Deputy Director in 2012.