Dental insurance gains popularity
Ttelevision advertising tells the tale. The cool, hip, attractive people have perfect teeth and white smiles. If they don’t match onscreen perfection, they need better toothpaste, whitening strips, trays and potions.
And they need better and more expensive dental care, provided by more complicated, more restrictive and much more expensive group dental insurance plans, provided, in turn, by a shrinking number of insurance companies.
Are your producers ready for the wave of new interest in and demand for dental health benefits? Are they ready to learn about all of the changes in dental insurance benefits? Are they ready to communicate them to confused employee benefit managers?
They’d better be. Group dental insurance is a rapidly growing and evolving employee benefit, providing both problems and opportunities for agents that market employee benefits programs.
Dental health benefits used to be a tiny component of corporate employee benefits programs-and a simple plan design that was easy to communicate and sell to employers. In the 1980s and 1990s, dental insurance plans were built from three blocks of services, mortared together with a very basic sense of cost control.
Most plans provided first-dollar coverage for preventive care and cleanings, 80% of basic restorative services, known in the industry as “drill and fill,” and 50% of major restorative services such as crowns and bridges and orthodonture. Budget-minded employers added a $50 or $100 deductible and an annual benefits cap of $1,000 or so.
Despite the advice that they should visit their dentists twice a year, many employees never used their benefits on an annual basis, and the overall cost of providing dental insurance was relatively stable-and a bargain compared to general health benefits that rose in double digits every year.
For most agents who sell employee benefits, dental insurance was a simple add-on for large employers, available from most of the large carriers that also provided major medical plans.
But as whiter smiles and straighter teeth for adults and more sophisticated orthodonture for children became popular in the last few years, dental benefits utilization and costs went on the rise. Dental insurance premiums are now increasing from 7% to 10% annually, only about half the rate of major medical insurance, but still significant, say dental insurance experts. And corporate buyers, the experts add, will not miss the significance.
Donald S. Mayes, DDS, author of Dental Plans: A Guide to Dental PPOs, HMOs and other Managed Plans (International Foundation of Employee Benefit Plans, 2002), says dental costs are indeed spiraling upward, but remain only about 10% of total employee benefits costs.
“So employers aren’t paying that much attention yet-but considering the way dental plans are evolving, they should,” says Mayes, a dental plan auditor and consultant in Hershey, Pennsylvania.
Dental benefits have tracked with growth in general managed care, he notes, as preferred provider organizations (PPOs) and dental health maintenance organizations (DHMOs) have become the new hot products marketed by dental insurers and regional dental practice groups.
Like major medical PPOs, dental PPOs indemnify employees who seek services from a preferred network of providers at a better rate than providers outside the network. DHMOs offer employees prepaid dental care from a narrower group of providers who receive a capitated per-patient rate.
Mass marketing companies, including credit card companies, college alumni associations, Internet marketing services and trade associations are also selling discount services that offer only cut-rate service from a directory of providers, but no indemnification.
The insured managed care plans still may provide quality dental care service and may help employers contain the rising costs, but they are not without problems. Employers who understand general health care PPOs and HMOs may be expecting much more than they are getting from the dental counterparts.
Mayes says dental managed care has had mixed results. Dental PPOs may offer discounts, but plan design may not successfully restrict the high– cost, low-frequency services that are driving costs upward. Most services are still provided by single general dentists who are rarely audited and not motivated to manage care.
Though the discounts may reduce the cost of individual claims and a lower rate of cost increase, they may not be changing the patterns of care that are creating rising costs. “The most expensive services-orthodonture and major restorative work-may be the least common services, but they also account for the large portion of dental costs,” Mayes says. “Discounting these services is good; but to contain or reduce costs, plans need to be better segmented to provide incentive to use more conservative services-if appropriate– and encourage more preventive care.”
PPOs also need to be monitored to assure that they provide appropriate access to care from providers that meet high standards, he says. Some PPOs may not provide appropriate geographical coverage for employees, leaving them to seek care from local, but more expensive out-of-network providers, defeating the value of building a PPO network.
Metropolitan Life Insurance Company in New York promotes a nationwide network of 50,000 dentists who offer 10% to 30% discounts as the cornerstone of its dental benefits products.
“Access has been a problem with the development of dental PPOs,” notes Alan Vogel, DMD, national dental director at Metropolitan. “In smaller markets, some dentists don’t want to be part of a PPO network. They believe they don’t need to provide discounts and accept the requirements of network participation.”
Vogel says that PPOs, if designed properly, should create better access by identifying a wide range of providers and establishing standards for participation that lead to better, more effective care. Dental insurers that build dental PPO networks have an opportunity to communicate standards and practice information that can improve overall care and create a pattern of utilization that contributes to dental wellness.
Integrating PPOs into dental benefit plan design also creates an opportunity to change and improve plan design, notes Todd Katz, Metropolitan vice president of dental product management. Metropolitan offers four different deductible and copayment structures as part of its group dental package to allow employers more flexibility in plan funding, he says.
DHMOs have not become a national trend, says Mayes, but still have some value in some markets. DHMOs tend to be effective in limited regions where they are dominated by a single well-run practice with internal incentives for managing utilization, he says.
“Dentists hate capitation,” he says. “As a result, many dentists will not participate in these plans. But when they are established by a practice committed to the concept, they can be exceptionally effective and rate very highly with employees.”
Mayes advises agents to offer a broader range of dental plans from multiple carriers to give their employer clients more flexibility in plan design.
“As employers compete more for the best human resources in their industry, they will need to offer benefits that are equal to or surpass their competition. As dental plans continue to grow in popularity, new recruits will expect adequate benefits.
“New employees will want broader networks that include their present dentists. Employees with families will want higher limits for orthodonture. One size won’t fit all,” he says.
Mayes also recommends that employers and their agents monitor and audit their dental networks carefully. Some PPOs and the less– structured discount networks sold by mass marketers may also attract dentists with less successful practices who are anxious to build a patient base but who may not always have resources to service the clientele or the chairside manner to maintain satisfaction.
Agents also may have some opportunities to sell new benefits to their small business clients, says Paul H. Michael, a regional vice president of group regional operations at
Metropolitan in Dallas, Texas. Metropolitan producers have discovered a growing interest among small businesses with 25 to 50 employees in adding dental benefits– even as they are restricting or raising copayments for their general medical benefits. The popularity of dental benefits and their relatively low cost make them valuable additions to small business benefits, he says.
Workers laid off from larger companies during the present economic slowdown are returning to the work force in smaller businesses, but they still expect comparable benefits. Small businesses may have to add dental insurance as one way to provide an adequate package to attract these employees, he concludes.
Copyright Rough Notes Co., Inc. Oct 2002
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