Both large and small employers have implemented Direct Reimbursement (DR) programs to assist employees in meeting the costs of their dental care.

A DR plan directly reimburses employees for any incurred dental expense, or a specified portion thereof, during a plan year, upon presentation of a paid receipt from the treating dentist. Benefits are expressed in maximum dollar limits per year or a percentage thereof, rather than on a list of covered services.

DR plans are self-funded, so no insurance company is involved in the design, marketing or administration of a DR plan. 

 

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How does it work?

A company, with the assistance of one of the brokers working with the WDA to present and establish DR plans, design the plan that meets the employer's financial commitment.

The employee goes to the dentist of their choice, pays the dentist's bill and submits a copy of the paid receipt or paid bill to the appropriate person at the company for which he/she works. The employer reimburses the employee according to the plan specifications. There are no claim forms, no submission of X-rays, no waiting for the return of a pre-determination. Treatment decisions are made according to the patient needs in consultation with the dentist.

 

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Advantages and disadvantages

Because DR is so simple and flexible, plans are tailored to the employee and employer needs. There is no set DR plan; it is not a product. Rather, it's a concept that is reflected in the plan design. Percentages and maximums are dependent upon the degree of financial commitment the employer is prepared to make.

Advantages for the employee

• The employee goes to the dentist of their choice
• The plan is easy to understand.
• The paid receipt is presented to the employer and payment is made according to the pre-arranged percentage of the maximum limit.
• Typically there are no exclusions.
• Prompt reimbursement from the employer.
• Makes the employee a wise dental consumer.

Advantages for the employer

• A larger share of the benefit dollar goes to dental care.
• The middleman, the insurance company, is removed.
• Administrative costs can be reduced from as much as 20-35% of the premium dollars, to below 5%.
• Cost savings.
• Flexibility. The employer can design the plan. The plan can reflect the corporate philosophy.
• Increased employee satisfaction.
• Employer assumes control of the level of benefits.
• Cost is based on actual experience of the plan.
• Investment of funds held in reserve, generating additional income.

Disadvantages

Having surveyed employers that have established DR plans for their employees, they have testified that there are no downsides and said they would not dream of discontinuing their plans. They love the simplicity, flexibility and cost effectiveness of their plans.

 

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Plan samples

Keep in mind that there are numerous designs. These are just a brief look at a few with a wide range of yearly maximums.

Option I

100% of first $200 of dental expenses $ 200

80% of next $1,000 $ 800

Total annual maximum benefits $1,000

Option II

100% of the first $100 =$ 100

50% of next $500 = $ 250

50% of next $1,000 = $ 500

Total annual maximum benefits = $ 850

Option III

50% of $1,000 = $ 500

Total annual maximum benefits = $ 500

 

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Cost-effectiveness

Administration cost reduction: If the company already has an indemnified plan, anywhere from 15-35% of the premium goes for administration and other expenses of the insurance company. In establishing a DR plan, the company only reimburses for the treatment provided. Therefore, the portion designated for administration is greatly reduced. A DR plan can be administered in-house utilizing about 1 hour per 1 00 employees per month. There are several computer programs available to assist the company with administering their plan, in-house. WDA has an arrangement with FlexBen, a Third Party Administrator, that is able to administer DR plans for a small monthly rate (about 3-7% of the cost of the plan) should the employer choose to use them.

• Employee participation: Employee participation in the treatment decisions is one of the main factors in achieving cost savings in a DR plan. Up-front payments by employees also contribute.

• Plan design: It is well documented that copayments reduce the overall cost of a plan. Almost all DR plans identify copayment levels that the employee must pay. There is always a maximum. After the maximum has been reached, any further costs are born by the employee. Modest plans are designed when plans are initiated. After the company has a year or two of experience, they can either increase the yearly maximum or decrease the copayment requirements for the employee.

• Market nuances: The dental market in an area will dictate cost containment measures. As patients become wise consumers, they tend to shop around for the best value for their limited dental benefit allowance. Up-front payments also make the patient more aware of the cost of the treatment and their responsibility in purchasing it.

 

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Freedom of choice

A DR plan gives employees the freedom to visit the dentist of their choice. The employee and dentist decide on the needed care. There are no limitations on pre-existing conditions nor are there exclusions for certain services.

For more information on how you can set up a DR plan for your employees, contact Tom Witkowski via e-mail to twitkowski@insuranceformembers.net, at 414-755-4150, via fax at 414-277-1124 or mail your request to:

WDA Insurance Programs, Inc.
Attn: Tom Witkowski
6737 W. Washington St., Ste. 2360
West Allis, WI 53214