Justin Stone, executive vice president and general counsel at MDLIVE, is a guest co-author for this post. He can be reached at [email protected].
Telehealth opportunities continue to grow at an exponential rate, aligning with the concurrent growth of retail and consumer-focused medicine. Capturing the retail sentiment, companies are looking to offer subscription-based models for telehealth services. While these models offer promise, companies should be aware of state law requirements, including whether or not these models would mean the company is in the “health insurance” business and subject to insurance regulations.
Subscription models are different from traditional fee-for-service models. Under the latter, the patient pays the provider on a per-consultation or per-procedure basis. In a typical subscription model, the patient pays a fixed recurring monthly fee for specified access to telehealth consultations. For example, a patient might pay $49/month for up to two consultations during the month. A related subscription model is an unlimited plan, where a patient pays a subscription fee (e.g., $99/month) for unlimited telehealth consultations.
Subscription-based telehealth offerings are similar to the “direct primary care” model used in some brick and mortar settings, as both offer a specified set of health care services available to a patient for a set monthly fee. There are obvious corollaries with concierge medicine as well.
Consumers benefit from the subscription-based model because it offers fixed prices, which in turn makes it easier to budget and plan. Providers benefit from the consistent recurring revenue stream, stable patient population, and opportunity to manage risk and realize the cost savings. Similar to other risk-based payment models, subscription-based services incentivize providers to be more efficient in delivering services and outcomes for patients.
One legal issue to be aware of under subscription models is state insurance laws. These laws generally require that companies assuming risk be licensed as insurance companies and have the adequate capitalization required under state law. In healthcare, “assuming risk” typically means the assumption of morbidity (sickness) risk or utilization risk.
If a company offers to provide health care services at a predetermined total cost, but the amount of services or the health of the covered population varies, particularly in a way that jeopardizes the company’s financial security, the company may be considered a health insurer. Telehealth companies with subscription offerings can be viewed as assuming utilization or morbidity risk, or both.
However, not all companies that assume health care risk are insurers. In some models, the assumption of risk is incidental to the company’s main business, and in others the company is explicitly exempt from insurance licensure under state law. One common exemption is for providers that receive capitation or risk-based payment as downstream contractors from licensed insurers. Although these providers are assuming utilization risk, regulators typically do not consider them to be insurance companies – provided they remain downstream contractors of insurers. Providers that contract directly with patients or self-insured employers or unions are not covered by this exemption.
Some states have taken a supportive approach and passed laws or rules explicitly exempting subscription-based primary care providers from insurance licensure. In states such as Kansas, Washington, and Utah, regulations expressly permit subscription-based “direct primary care” practices. Maryland’s insurance regulator issued a report on concierge and other alternative models of primary care in 2009. The report suggests subscription-based models of patient care are not insurance if, among other factors, there are reasonable limits on the type and quantity of services provided (i.e., stop loss provisions), the provider can reasonably provide all of the contracted services, and the subscription agreement can be terminated in exchange for a prorated refund of subscription fees. These laws and rules are focused on the primary care setting, but should reasonably apply to a telehealth-based practice in the same way they apply to brick and mortar practices. And more change is coming, as additional states, including Florida, are considering similar permissive laws to promote subscription-based health care models.
While companies considering a subscription-based telehealth practice should pay close attention to state law and insurance regulations, this is a rapidly evolving area of regulation and many opportunities currently exist for companies to offer these services in scalable models across the country.
This post originally appeared on InHouseAccess.com and appears here with permission.
