Employer tele-mental health is new branding on an old model
Lyra, Ginger, Spring, and Modern are making access cooler while remaining tethered to an older system
Last week’s newsletter stemmed from a question: how will telehealth-first mental health companies evolve in physical spaces?
This week, my writing stems from a similar question: how will telehealth-first mental health companies change post-COVID?
I also want to note upfront that I did not originate a lot of the insights in this newsletter—I pulled from a variety of written articles (as cited) and some good conversations with people in the space who don’t want to be credited. They know who they are. Thank you!
How employer mental health benefits work
Before the latest crop of telehealth mental health companies came to the fore, the main source of mental health benefits for employees was through a traditional EAP. EAP stands for “employee assistance program.” It allows an employee to access a short-term engagement that triages their mental health needs, provides time-bounded care, and offers referrals. Employees can self-refer to the EAP service, the employer can recommend that an employee use the service, or an employer can mandate, on condition of the employee’s job, that the employee go through the EAP (for example, to treat substance abuse).
Employers can choose which EAP provider to offer. The service can be tagged onto the employer’s insurance offering (for example, Aetna offers an add-on EAP), but there are also standalone networks. The standalone networks argue that they have more expertise, flexibility, and coverage. Insurer-based EAPs, meanwhile, tend to be cheaper.
Another important factor driving the EAP market is that, depending on the geography of the company and its employees, the EAP needs to have a wide network. Mental health services, like physical health services, can only be provided to a patient when the provider is certified in the state in which the patient is located. This means that, to provide services for a dispersed network of employees, the EAP has to have providers licensed in all or most states.
The general pricing model—which is what makes EAPs a great business—is two-tiered. The EAP charges a small per member per month (PMPM) fee for every employee in perpetuity, and then a fee-for-service rate for every visit than an employee actually takes.
How this is changing
As more companies, prodded by Facebook and Google, try to adopt a veneer of ~vibiness, they are increasingly turning towards newer EAPs. These are provided by companies like Lyra, Ginger, Modern, Spring, and Talkspace; all of them sell to employers, and all of them have some semblance of a national network.
These companies all provide a more or less undifferentiated—but valuable—service: a cool, tech-branded front door through which employees of partner companies can access mental health services.
For some of these, their early success seems to have ridden on the founders’ pre-existing relationships. For example, the founder of Lyra is the former CFO of Facebook and Genentech, which explains why Lyra became a common EAP provider in the Bay Area.
Which is fine! That’s how a lot of companies get started! But it also means that the market—here, I’m returning to one of my former arguments—has mostly been carved up by undifferentiated employer-focused mental health companies that focused on market share early-on. In other words, this also looks like a commodity market, despite the cool branding.
Emphasizing the lack of differentiation, some or all of these companies at the beginning of the life cycle (and possibly continuing today, though I genuinely don’t know) expanded their networks by linking into an existing, less-well-branded EAP. In one of my conversations, a mental health founder summed up this dynamic as “EAP 2.0, which exists by tapping into EAP 1.0.”
Of course, the need to tap into existing networks is caused by the artificial pressure of state licensing requirements, an artifact of a less mobile age.
The artifice of the state licensing requirements was known by most but revealed to all when the requirements collapsed during COVID-19. Suddenly it didn’t matter where a doctor had been licensed, as it should be.* Whether this continues to be true (and in which states) post-COVID remains to be seen; many providers have taken a conservative approach and continue to behave as though they’re constrained by state licensing requirements.
*To really live in a world without state licensing requirements, information about providers being sanctioned or banned from practice should also be available nationally, not just within states. As it currently stands, a provider who loses their license in one state stands a good chance of being able to set up practice again in another state, a failure of reporting that has led to quite a few true-crime podcast series.
This means that the EAP 2.0 providers (Ginger, Lyra, et al) will either have to grow their networks or continue to partner with existing EAP services.
This dynamic may be heightened if remote work continues and workers move to cheaper, more geographically distant areas. As Derek Thompson wrote in The Atlantic about the future of white-collar work, “[t]he other, weirder possibility is that the remote-work revolution will eliminate the concept of a metro hub entirely, as companies embrace the reality of a permanently distributed workforce. What if the next Silicon Valley is nowhere—or, just as precisely, everywhere?”
If that’s the case, then a density of therapists in, for example, San Francisco could suddenly become a liability. The EAP 2.0 would have to expend more energy on increasing its network into suburban and rural areas like the Sunbelt and, say, Tahoe, rather than maintaining such a large Bay Area network.
Another interesting dynamic here is that the therapists for all or most of these companies are 1099 contractors. That means that a therapist can see Lyra clients in the morning and Ginger clients in the afternoon, depending on which service has enough clients and which service pays the most. This seems like a recipe for high churn (and consequently lower quality of care)—but also greater company dynamism in responding to changing workforce requirements.
In Sarah Du’s map of the mental health space, which I mentioned last week, she gives these predictions:
Six areas I predict continued momentum are: 1) solutions for mild and moderate cases of mental illness, 2) solutions focused on prevention and upstream intervention through seamless monitoring and diagnoses, 3) the unbundling of mental health services, 4) solutions targeting youth, 5) senior-focused solutions, and 6) provider tools that monitor and improve patient outcomes.
The continued dominance of EAP 2.0 meets with predictions 1 and 3. These employer-focused companies treat a mostly white collar, low-acuity population.
One last, obvious point I want to emphasize is that, while white collar tech workers certainly should have easy access to mental health care, the current state of affairs more or less increases their access while ignoring the bulk of the country that doesn’t work for a company like Uber or EA.
Someday the continued rise of these companies may expand access (which is unlikely, in my opinion)—or we’ll continue to wait on greater Medicaid funding or an innovative model to deliver care to those who don’t already have it.