- What to look for
- Your family’s needs
- Poor oral health affects job performance
- Why employers should offer dental benefits
- Direct Reimbursement (employer funded plans)
- Managed care: A consumer’s perspective
Elements of a good dental plan include:
- Affordability: Due to the dental profession’s promotion of fluoride, sealants and other preventive care, oral health in America has improved. The cost of dental treatment has increased less than medical care, physician services and hospital room rates.
- Prevention:The vast majority of dental disease is preventable. Preventive care is especially important since dental disease, once started, can only be halted by a dentist’s care.
- Cost-effectiveness: Dental decay or disease that is detected early has lower associated treatment costs.
- Predictability: Although the need for dental care varies greatly among individuals, the dental needs of an employee group are highly predictable. For this reason, a dental benefit can be self-funded. The risk of wide fluctuations in cost and utilization, evident in many medical benefits, is rarely observed with dental statistics.
Traditionally, dental benefit plans permit patients to receive treatment from a licensed dentist of their choice.
Fee-for-service plans pay the benefit on a service-by-service basis rather than on a salaried or capitation basis. They are often called UCR for usual, customary and reasonable plans. The benefit pays on a set percentage of the lesser of the dentist’s fee or that fee which has been determined to be “customary” or “reasonable”.
The insurance company determines what is customary, the percentile on which the payment is based. Frequently, it is based on the 90th to 85th percentile. That means the payer will honor claims in full if they do not exceed the specific percentile. This is fiscal management device that allows payers to limit the dollar consequences of their plans. The patient is responsible for the difference between what the plan pays and the dentist’s charge.
An ideal benefit plan has three categories of treatment:
- Preventive, diagnostic and emergency services: Preventive dentistry refers to dental procedures that prevent the occurrence of oral disease, such as cleanings. Diagnostic services are those that detect the presence or absence of disease, such as X-rays. Both preventive and diagnostic services are vital to an individual’s oral wellness and should be considered an integral part of any company’s program. By providing access to these services, employers can realize long-term cost-containment. Services include oral examinations, cleanings, X-rays, fluoride applications, sealants and space maintainers. The American Dental Association and WDA recommend this category of treatment be covered 100 percent and not apply deductibles or co-payments.
- Basic restorative dental care: Restorative dental care covers a range of treatments, because the restorative needs of employees in any company will vary considerably. A dental benefits plan should include restorations, oral surgery, periodontics and root canal therapy. Coverage for this category of treatment is frequently at 80 percent.
- Major restorative dental care: Major dental care generally involves more extensive procedures, such as crowns, dentures, bridges and orthodontics. Coverage for this category of treatment is frequently in the 50 percent payment range.
In addition to the three categories of treatment included in an ideal dental benefit plan, there should be patient participation in the payment of some services through copayments or coinsurance. Personal responsibility for assisting with payments helps patients value the benefits provided.
Most dental plans are designed to be of “assistance” in paying for dental services; they do not pay 100 percent of procedures needed.
Consider these additional things when choosing a plan for yourself or your family:
- Will you or your children have to change dentists?
- If you have to choose a dentist from a list of providers, take into consideration where the dentist is located and how far you will have to travel.
- Can you choose the dentist you want to see for your oral health care?
- What is the monthly premium cost?
- How much does the plan cover for preventive, basic and major dental treatment needs?
- Are there any waiting periods before the plan covers certain care?
- Does the plan allow freedom to choose a specialist?
- Does the plan cover orthodontics?
- Ask friends and neighbors about the plan they or their family uses.
Poor oral health among adults contributes to an estimated 164 million lost work hours every year in the United States according to the Surgeon General. (More than 51 million school hours are lost annually by children in the U.S.)
Dental disease does not go away and only gets worse without proper care. Professional intervention by a dentist is necessary to halt decay or disease progress.
Treating problems early and before they require extensive (and expensive) attention can save money. For example, a small cavity left untreated becomes a bigger cavity that requires a large restoration that could cost twice or three times more.
A large cavity left untreated could lead to a root canal, crown and/or extraction. Either way, the employee loses work, because root canals and/or crowns require several visits to the dentist. If the tooth is pulled, the decision must be made about a replacement (e.g., implant, bridge). These procedures can cost several hundred dollars.
Untreated dental disease does not go away. Early detection and treatment saves a patient pain, time and money.
- Dental treatment is relatively low-cost. It makes economic sense to provide a dental benefit package.
- Dental benefits help individuals by paying for a portion of the cost of their dental care.
- Employee absences or poor work performance may be attributed to poor dental health. According to the National Center for Health Statistics, each year, one in 10 individuals experience a restricted day, bed day or lost work day due to dental disease.
- Dental benefits can enhance a collective bargaining package. Having a dental benefits plan helps recruit and retain employees. Dental benefits are consistently cited as one of the most sought-after employee benefits. Dental coverage has been ranked one of the top five benefit factors weighed by employees considering job offers.
- A variety of dental plans give purchasers more options and a range of benefit levels.
- Dental benefit plans promote oral health. History has shown that dental benefits have played an important role in improving access to dental care for millions of Americans.
Both large and small employers have implemented Direct Reimbursement programs to assist employees in meeting the costs of their dental care. Simply put, DR plans are self-funded by the employer rather than paying an insurance company to assume the “risk” of the plan. For example, in DR, an employer might agree to pay 80 percent of up to $1,000 per year, per employee for dental care.
A DR plan calls for direct reimbursement to employees for an incurred dental expense, or a specified portion thereof, during a plan year, upon presentation of a paid receipt from the treating dentist. DR plans may also be set up to pay the dental office directly upon submission of a financial statement detailing treatments received. 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 and utilize a lower-cost, third-party administrator to operate. Employers can avoid the extra expenses that come with utilizing an insurance company to design, market and/or administer a DR plan.
How does it work?
A company, assisted by a broker who will administer a DR plan, designs the plan to meet the employer’s financial parameters.
An employer usually sets up a DR plan that allows employees to go to the dentist of their choice and reimburses either the employee or the dental office according to plan specifications. While there must be paid receipts for bills submitted, there are no insurance “claim forms”, no submission of X-rays and no waiting for the return of a predetermination. Treatment decisions are made according to patient needs in consultation with the dentist and paid for under the plan restrictions regarding annual maximums and coinsurance limitations.
- Go to the dentist of their choice
- Plan is easy to understand
- Paid receipt or financial statement presented to employer and payment made according to the pre-arranged percentage of the maximum limit
- Typically, there are no exclusions other than cosmetic procedures
- Prompt reimbursement from the employer
- Engages the employee in the purchase of dental services
- A larger share of the benefit dollar goes to dental care rather than insurance overhead
- Less administrative costs (usually as low as 5 percent – much lower than insurance plans)
- Cost savings
- Flexibility – employer can design the plan to reflect corporate philosophy
- Increased employee satisfaction, because DR doesn’t have confusing coverage limitations
- Employer assumes control of benefit levels
- Cost is based on actual experience of the plan
- Employer can reinvest funds not spent in a plan year, which can help hold down future costs and support long-term sustainability of the plan
Employers who have established DR plans testify there are no downsides and say they would not dream of discontinuing their plans for employees. They love the simplicity, flexibility and cost-effectiveness.
Keep in mind there are numerous designs. Below is a brief look at a few with a wide range of yearly maximums.
100 percent of first $200 of dental expenses = $200
80 percent of next $1,000 = $800
Total annual maximum benefits = $1,000
100 percent of the first $400 of dental expenses = $400
50 percent of the next $2,200 = $1,100
Total annual maximum benefits = $1,500
50 percent of the first $1,000 of dental expenses = $500
Total annual maximum benefits = $500
If the company already has an indemnified plan, a percent of the premium goes to the insurance company for administrative and other expenses.
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 using a low-cost, third-party administrator (5-8 percent administrative fee) or can be administered in-house utilizing about one hour per 100 employees, per month.
There are several computer programs available to assist the company with administering their plan in-house. The WDA has an arrangement with SIMPLE, a third-party administrator that manages DR plans for a small monthly rate.
- Employee participation: Employee participation in treatment decisions is one of the main factors in achieving cost savings in a DR plan. Upfront payments by employees may also contribute.
- Plan design: It is well documented that copayments reduce a plan’s overall cost. Almost all DR plans identify copayment levels that the employee must pay. There is always a yearly maximum, as well. After the yearly maximum has been reached, any further costs are to be paid in full by the employee. Modest plans are designed when DR is first initiated. After the company has a year or two of experience, they often choose to increase the yearly maximum or decrease the copayment requirements for employees.
- 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. Upfront payments also make the patient more aware of the cost of the treatment and their responsibility in purchasing it.
Freedom of choice
A DR plan gives employees the freedom to visit the dentist of their choice. The employee and dentist work within the parameters of the employer’s payment plan to decide among their options on necessary treatment. There are no limitations on pre-existing conditions and there are usually very few exclusions for services (cosmetic services are often excluded).
For more information on how you can set up a DR plan for your employees, contact:
Professional Insurance Programs
6737 W. Washington St., Ste. 2360
West Allis, WI 53214
There are several models of managed care dental benefits plans. A Preferred Provider Organization (PPO) is a contracted plan whereby dentists agree to discount their fees, sometimes as much as 20 percent, as a financial incentive for patients to select their particular practices.
- Reduced premium rates.
- If the patient’s dentist is not a plan participant and the patient decides to remain with his/her dentist, the patient will have a reduced level of benefits and have higher out of pocket costs.
- The patient will have to change dentists to maintain the full level of benefits.
- The plan may influence provider treatment decisions.
- The patient may have to travel a greater distance to obtain treatment from a contracting dentist.
Capitation is another form of managed care that pays a contracted dentist a fixed amount per enrolled family or patient per month. In return, the dentist agrees to provide a specific level of treatment or scope of benefits to the patients as necessary.
- Generally, very limited out-of-pocket expenses.
- The premium is usually the least expensive dental plan for purchasers.
- Benefits are easily understood.
- The patient’s dentist may not be a participant in the panel of providers which may prompt the patient to change dentists.
- Patients pay an additional surcharge for some of the more expensive procedures, especially those involving lab fees.
- There is uncertainty in not knowing if the payment to the dentist sufficiently covers the amount and level of dental care required.
- Patients are required to obtain treatment from designated clinics or dental offices. It is not uncommon for patients to see a different dentist at every dental visit in this setting.
- Depending on the specific design of the plan, specialty care and referrals may be excluded or severely restricted.
There is some question as to the capitation model’s impact on dentists’ treatment decisions since the payment is independent of the rendered care. This potential conflict between patient and dentist interests could result in under treatment, pacing of necessary treatment or other situations leading to friction in the doctor-patient relationship.