Recently, I reposted an article on dental insurance. I gave my comment that coverage is worth it if you get your teeth cleaned twice a year or have a family member with dental issues that requires treatment. I want to revisit dental insurance here, but more from the providing employer’s perspective than the employee’s.
Dental insurance has come to the place where it is now complicated enough and premiums are high enough to look at alternative funding mechanisms. Yes, I am talking about self-funding dental plans. I am not talking about small groups, but for groups that have at least 50 or more enrolled employees. This seems to be the floor on the funding mechanism.
Just like how self-funding has become a big factor in group medical, I believe dental coverage is becoming a factor in groups with over 50 enrolled. Let’s take a quick look at some of the components of these plans.
Of course the first component is claims funding. I have heard it said, “Claims are claims.” True enough, but pricing of those claims is always a factor. Why pay retail when you can pay wholesale or get a discount? Why not let the consumer know what you (or “the plan”) are willing to pay for procedures up front? That is why many company plans use a dental PPO network and a prearranged rate structure.
How about doing it another way? What if you told your dentist that “the plan” pays 85% of UCR for procedures? This means that 85% of the dentist in that area accept the rates that “the plan” pays for procedures. This is extremely reasonable and does not stop the dentist from charging more than others, but puts the decision to use that particular dentist back in the hands of the employee/client. If you think they are worth that much more, then you pay the difference. But this does control costs and makes it easier to know if your dentist is “in network”. You simply let them know that “your plan” pays 85% UCR, then the costs of claims are controlled to some extent. The rest is simply claims dollars in and claims dollars out.
The second component has always been plan design. Plan design regulates the claim dollars differently than negotiating claim costs. As I have always looked at it, why does “the plan” cover more of one procedure than another? Who decided that part of a root canal is basic and part is restorative? If I get just the root canal, but not the crown, it’s only half the total procedure. But by paying 100% of preventive we get our teeth cleaned on a more regular basis to justify having the plan in place. What if I propose “the plan” pays the same portion of whatever procedure is being performed? If my tooth needs a root canal, the pain does not say “wait, how much is it?” What if “the plan” took more of a bucket of money approach than percentages of procedures? Let’s say it pays the First $500 of bills at 100% and the remaining benefit at 50- 60%. Would this simplify “the plan” for all of us? Self-funded plans can do that for you.
The third component is the cost to have someone administrate the plan for you. The administrators I work with can handle this very cost effectively and easily with their electronic claims systems. It seems that dental claims are not as subjective to whether you need a procedure or not compared to medical claims. Nice. So, for less than the traditional insurance company, these administrators can create “the plan,” pay claims and other costs typically for less than the insurance company. The traditional dental carrier really only needed because a company plan is too small to set up a reasonable claims fund to handle claims.
Plus, let’s eliminate the fourth component of typical dental plans: profit. By self-funding a plan, you keep the extra funding for claims in the claims account. This can be used to cut cost for the next year or build the account to cover any future “large” claims. Usually with dental there are no $40,000 procedures like in medical. The insurance company does not refund the extra money they planned for claims – they just call it profit.
There is one risk: the claims fund runs short. This is why companies need a sufficient number of enrollees. If a plan runs short, the employer helps fund the plan claims until premium comes in to build the fund back up. If the administrator has done a number of these plans they usually can help you to price them so that this rarely happens.
I think the day of “Simple Dental plans” has come to the market. You need a good administrator that has done these before to help with pricing and make sure that you have the needed number of enrollments to make it be a good experience. Simple dental plans can make your employees happy with benefits that are easy to understand and both of you happier with the monthly premiums.
