VPC Train is Gaining Speed

Credit Suisse http://www.credit-suisse.com caught up with Teledoc (TDOC) to discuss the company’s new partnership with Ambetter/Centene for Virtual Primary Care (VPC) in addition to implications from UnitedHealthcare’s recently announced virtually primary care product powered by Optum.

As Credit Suisse analysts have argued in the past, VPC is the next major leg in the virtual care adoption trajectory. While employers took the lead in rolling out core urgent care telehealth benefits (insurers quickly followed), the VPC rollout is likely to be led by insurers, with virtual first health plans being a derivative product offering.

UNH (leveraging Optum) and Centene/Ambetter (leveraging TDOC) are the two recent additions to a growing list. Although the analysts would argue UNH’s announcement was already discussed on their earnings calls.

With TDOC’s current market share among payers and employers across the country, analysts expect TDOC to gain its fair share of the market in this VPC adoption push. With TDOC’s current market share among payers and employers across the country, analysts expect TDOC to gain their fair share of the market in this VPC adoption push. TDOC’s Primary 360 product is already live today with several Fortune 1000 employers, in addition to the virtual primary care product rolling out nationwide with Aetna in early 2022.

While CNC/Ambetter Virtual Access financial impact for TDOC is unlikely to be a needle mover NT, since two nationally recognized health plans seeing the value in Primary360 should bode well for additional opportunities LT.

Further with the initial rollout with Centene including just four states in the Health Insurance Marketplace, several up sell opportunities remain on the table. While TDOC will defer the 2022 guidance discussion until its investor day on November 18, analysts expect the company to provide a high level update on the momentum it is seeing across different businesses on the 3Q earnings call.

CNC’s exchange business is launching a virtual health plan for 2022 in MI, MS, SC, and TX in partnership with TDOC’s Primary360 service, which gives members access to a Teladoc PCP and Care Team. Also offered is a range of services including the virtual delivery of 24/7 urgent care, prevention, screening, and condition management, as well as navigation to Ambetter’s in-person network providers. In addition, select in-network lab & other preferred in-network services will be delivered for a $0 co-pay when referred by a VC provider.

TDOC management highlighted that Ambetter Virtual Access is a new and separate plan that will be offered on exchanges where Centene has a leading market share across the nation. The premiums will be below legacy offerings, which makes the plan attractive for new customers to sign-on on a comparable basis. Additionally, every enrolled member on the plan will have access to initial rollout in select states. TDOC commented that Centene likely wants to see some traction prior to expanding into other states and other insurance markets.

Given the nature of virtual-first plans, the plan is likely more attractive towards younger and urban populations with greater mobile access. However, TDOC is confident that virtual-first plans and VPC will continue to spread and become more pervasive across other markets, which does not exclude Medicaid and Medicare Advantage populations.

Thoughts on UNH’s Launch of NavigateNOW, a virtual first health plan that offers an integrated virtual & in-person solution across several types of care including wellness, routine, chronic condition management, urgent, and behavioral health services.

The NavigateNOW product will offer a comprehensive medical plan at ~15% less premium cost than traditional benefit plans in addition $0 for virtual and in person primary care and behavioral health visits, virtual urgent care, and most generic medications with unlimited chat, online scheduling and on-demand same day appointments. As for the NavigateNOW product in particular, UNH had alluded to a new suite of digital first products using Optum’s capabilities as part of the 3Q21 earning call on October 14.

UNH is partnering with TDOC, AMWL, and Doctor on Demand as a carved-in benefit for on- demand urgent care telehealth services offered to employers across the country. The Oct. 18 announcement from UNH on the launch of a virtual first health plan through a collaboration with Optum (a subsidiary of UNH) has led to questions about the go-forward relationship UNH has with third party telehealth vendors.

While TDOC is not involved in the NavigateNOW product, the relationship continues on the urgent care/general medical component where TDOC has +15 min members with UNH (5 min PMPM; 10 min visit fee only). Notably despite TDOC not participating in NavigateNOW, TDOC is deeply embedded across several other UNH products across multiple channels.

While UNH has been known for their multi-vendor approach, there have also been instances when the company has moved some of its out-sourced businesses to in-house. It is recognized that this dynamic could remain an overhang. However, Credit Suisse analysts estimate that the UNH-related annual revenue for TDOC is ~$50 min, representing ~2.5% of 2021E revenues.

For questions, to provide feedback or news, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.

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