Telehealth in Small Group Plans: Utilization Data, Cost Impact, and What Members Actually Use

Telehealth utilization surged during 2020 and 2021, settled to a durable baseline, and now varies widely by plan design and member population. Telehealth accounted for less than one percent of healthcare visits in 2019, reached 31.2 percent during the pandemic peak in 2020, and stabilized between 5.7 and 7.0 percent by 2023. The cost impact depends on whether telehealth substitutes for in person visits or generates additional visits through convenience driven induced demand. In small group plans, telehealth is used primarily for behavioral health, acute minor illness, and dermatology. The value depends on how plan design channels its use. Telehealth is a useful but overmarketed component that requires integration into the level funded architecture rather than addition as a standalone benefit.

Utilization Data After the Surge

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Telehealth utilization peaked in spring 2020 at levels driven by necessity rather than preference. Prior to the pandemic, telehealth accounted for just 0.1 percent of monthly evaluation and management visits in Medicare populations. By April 2020, telehealth surged to 41.0 percent of such visits. The stabilization that followed settled telehealth between 5.7 and 7.0 percent in 2023 and 2024, meaningfully higher than pre pandemic levels but far below the peak that some predicted would become permanent.

The stabilization point varies by service category, and the variance defines where telehealth produces value.

Behavioral health shows the strongest sustained telehealth adoption. According to Trilliant Health analysis, behavioral health visits totaled 66.4 million in 2024, compared with 62.8 million primary care visits, the first year that behavioral health accounted for a larger share of physician service volume for commercially insured patients. Behavioral health continued to account for the majority of all virtual visits, representing 67 percent of telehealth encounters in 2024. FAIR Health data shows that mental health conditions account for 68.9 percent of telehealth claim lines nationally, with generalized anxiety disorder representing 34.7 percent, major depressive disorder 21.6 percent, and adjustment disorders 16.3 percent.

The behavioral health telehealth pattern is durable because therapy and psychiatric medication management translate well to video. Members report equivalent satisfaction with video therapy compared to in person sessions. Therapist availability improves through telehealth because geographic constraints are removed, a meaningful advantage given the shortage of behavioral health providers in many markets.

Acute minor illness shows moderate and stable telehealth adoption. Upper respiratory infections, urinary tract infections, rashes, and allergies are straightforward visits where the diagnosis is usually clinical rather than requiring physical examination. The convenience value is high for the member. FAIR Health data shows acute respiratory diseases and infections accounting for approximately 1.9 percent of telehealth claim lines nationally.

Chronic disease management shows lower adoption than vendors project. Diabetes management, hypertension management, and other chronic conditions require more interactive follow up than a periodic telehealth check in provides. Member engagement with chronic disease telehealth programs declines over time. The initial enthusiasm for remote patient monitoring and telehealth based chronic disease management has not translated to durable engagement in most commercial populations.

Research published in medRxiv analyzing Medicare fee for service claims found that telehealth use stabilized in 2021 and beyond at between 5.7 and 7.0 percent of evaluation and management visits. The study found that overall outpatient utilization remained stable post pandemic, and that increased telehealth adoption was not associated with a rise in total outpatient visits. Specialties with high telehealth use, such as behavioral health, and medium telehealth use, such as primary care, experienced a 4.1 percent and 7.2 percent relative decline in overall visits respectively compared to low telehealth specialties.

Substitution vs. Induced Demand

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The cost impact question is whether telehealth visits substitute for in person visits or represent visits the member would not have made without the convenience of telehealth.

Substitution produces cost reduction. If a member uses telehealth for an acute illness visit and would otherwise have visited an in person urgent care or primary care provider, the telehealth visit costs less than the in person alternative. FAIR Health data shows the national median telehealth visit cost at $55 compared to $53 for an office visit, essentially equivalent pricing. The cost reduction comes from avoided facility fees, shorter visits, and reduced time off work for the member. The medRxiv study found that in behavioral health, telehealth accounted for 43.8 percent of visits post pandemic, compared to just 8.4 percent in primary care and 1.2 percent in orthopedic surgery. This concentration pattern suggests that where telehealth has proven effective, providers and patients have adopted it; where it has not, utilization remains minimal.

Induced demand produces cost increase. If a member uses telehealth for a concern they would not have addressed without the convenience of virtual access, the telehealth visit is an additional cost rather than a substitution. The convenience of telehealth may lower the threshold for seeking care, generating visits that would not otherwise occur. Tele prescribing has increased across drug classes since the pandemic. As of Q3 2023, 30.3 percent of antidepressant prescriptions, 38.9 percent of stimulant prescriptions, and 5.4 percent of opioid prescriptions originated from a telehealth visit. The high stimulant prescribing rate through telehealth has prompted regulatory scrutiny of tele prescribing for controlled substances.

Trilliant Health analysis concluded that telehealth utilization trends signal that patients do not view telehealth as a substitute for in person care for most conditions, except for behavioral health. The analysis found that tapering telehealth demand indicates consumers largely view telehealth as appropriate for low acuity behavioral health treatment and less frequently for chronic condition management. The medRxiv study came to a more favorable conclusion, finding that increased telehealth adoption was not associated with a rise in total outpatient visits. The divergence may reflect methodological differences: the Medicare data shows substitution at the aggregate level, while the commercial data shows more nuanced patterns by specialty.

The evidence is mixed but tends toward substitution in behavioral health and acute minor illness, and toward limited impact in other categories. For small group level funded plans, the practical implication is that telehealth produces cost value primarily in behavioral health, where the substitution effect is clear and where provider access constraints make telehealth particularly valuable.

Plan Design for Telehealth Value

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Telehealth value in a level funded plan depends on how plan design channels its use.

First visit telehealth with triage function produces the strongest cost impact. A plan that routes members to telehealth as the first point of contact for acute needs and then triages to in person care when necessary captures the substitution value of telehealth while avoiding unnecessary in person visits. This requires member education and engagement: the member must know that telehealth is available and should be their first contact for non emergency acute concerns.

Behavioral health telehealth with expanded network access addresses a real access problem. Many markets have insufficient behavioral health providers. A plan that expands behavioral health access through telehealth removes geographic constraints and wait time barriers. The member who would otherwise wait six weeks for an in person therapist appointment can access care within days through telehealth. This is not just substitution; it is access expansion that produces clinical value.

Telehealth as convenience add on with no routing produces less cost impact. A plan that adds telehealth as an additional access point without channeling utilization captures less value. The member who has both telehealth and in person options with no guidance or incentive to use telehealth first will use whatever is most convenient for each situation. The plan pays for the telehealth benefit whether or not members use it instead of in person care.

The integration question for telehealth parallels the integration question for other benefits components. A telehealth benefit that sits alongside the medical plan with no data linkage and no routing is accretion. A telehealth benefit that functions as the first point of contact for acute care, with triage to in person when needed and claims data integration that allows the TPA to measure substitution effects, is architecture.

What the Data Actually Shows

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The honest summary of telehealth in small group plans requires distinguishing what is proven from what is marketed.

Behavioral health telehealth produces value. The utilization is high, the member satisfaction is strong, the substitution effect is real, and the access expansion addresses a genuine provider shortage. A level funded plan that invests in behavioral health telehealth is investing in a component that produces measurable clinical and cost value.

Acute minor illness telehealth produces modest value. The utilization is moderate, the convenience is real for members, and the substitution effect is present but smaller than in behavioral health. The cost differential between telehealth and in person visits for acute minor illness is narrow.

Chronic disease management telehealth has not proven its value in commercial populations. Member engagement declines over time. The promise of remote patient monitoring and telehealth based chronic disease management exceeds the evidence. A plan that invests heavily in chronic disease telehealth may be buying marketing rather than outcomes.

Telehealth vendors who sold into the employer market aggressively in 2020 and 2021 projected utilization and cost impact that did not materialize. Optum closed its virtual care business in 2024. Walmart closed Walmart Health Virtual Care. The venture capital funded telehealth expansion has contracted as the utilization data showed narrower use cases than projections suggested. The surviving telehealth applications are concentrated where the evidence supports them: behavioral health access, acute minor illness triage, and select specialty applications.

For a level funded plan, telehealth is a component worth including but not worth overinvesting in. The value is concentrated in behavioral health and acute triage. The cost is modest, typically $2 to $5 per employee per month for access to virtual care platforms. The return depends on utilization patterns and the degree to which telehealth is integrated into member navigation. A plan with strong behavioral health telehealth utilization is getting value. A plan where members have telehealth access but continue using emergency departments for acute minor illness is paying for unused capacity.

The integration that produces value requires routing and measurement, not just access. An employer evaluating telehealth should ask whether the benefit is positioned as the first point of contact for appropriate conditions, whether members are educated about when to use telehealth, and whether the TPA can measure substitution effects in claims data. A telehealth benefit that sits alongside the plan with no integration is accretion. A telehealth benefit that functions as part of the care delivery model is architecture.