New Face Of Dental Benefits

Copyright 2009 SourceMedia, Inc.All Rights Reserved Employee Benefit Advisor

May 2009

FEATURE; Pg. 46 Vol. 7 No. 5

2198 words

New face of dental benefits; Providers are mixing new and different elements in today's dental plans creating sales opportunities for brokers

Lynn Gresham, illustrator tom cocotos

Think dental benefits are simple and straightforward? Think again.

Demand for dental coverage is increasing, and providers are responding with a new generation of plan designs that are progressive on one hand, "retro" on the other, and increasingly consumer centric.

"It's very interesting to watch what's happening in the industry right now," says Karen Gustin, vice president of group and managed care products for Ameritas.

"Employers and employees are looking for value in dental benefits, not just price. But at the same time, they want products at less cost. The result is that it's taking the industry back to the products of the 1980s."

The economy is at the top of everyone's mind, agrees Alan Hirschberg, head of Aetna Dental.

"What we're seeing from our plan sponsors is concern over costs. They are returning to lower-cost options, such as dental maintenance products."

At the same time, employers who offer dental benefits want more for less: more coverage and more flexibility for themselves and their employees. Brokers who can tailor plans to meet these demands will win customers, but for many, it may be a learning curve. Increasingly, employers are faulting brokers for lack of knowledge on dental benefits, according to a recent survey by the National Association of Dental Plans.

NADP's 2008 Purchaser Behavior Survey showed that the number of employers who view brokers as fully informed on dental options fell 27 points from 2005, says Evelyn Ireland, the group's executive director.

"There were also significant increases in employers' views of brokers as focused more on their own interests rather than those of the employer and being an unnecessary step in the process," she adds.

Indeed, while a growing number of employers report that working with a broker saves them money, 44% of the survey respondents said that brokers are more focused on commissions than on their clients' needs. That view was expressed by just 28% in 2005.

The survey's bottom line is that more employers are working with brokers out of necessity, not preference. The number of respondents preferring to work directly with a dental plan provider rose to 38% in 2008 from 26% in 2005.

"The general consensus is that employers are relying on brokers as time-savers, but they would look at moving back to a carrier if they had the time to invest in the relationship," Ireland summarizes.

Make the dental-medical link

One way brokers can improve their image and their book of business is to focus on the dental-medical link, Ireland suggests.

Of the 1,900 employers questioned by NADP, 75% said they wanted enhanced benefits for related medical conditions. Furthermore, among those who were planning to change dental insurance carriers, nearly half (42%) said they were looking for better coverage of dental treatments related to the detection and prevention of diseases and adverse medical conditions.

"Making the connection between medical and dental can help brokers make a dual sale," stresses Ireland.

Tom McInteer, second vice president in the Group Dental division of Guardian Life Insurance Company of America, echoes this view.

"There's real value to promoting the worth of dental care and the fact that regular preventive care can really save money in medical care costs over the long run," he says. "Preventive care also will help save on dental bills in the future."

Dental plans increasingly are covering such things as oral cancer screenings, extra cleanings for at-risk groups such as pregnant women, and periodontal treatment for diabetics. Hirschberg expects this trend to persist.

"Payers and employers will continue to add benefits and other health conditions to what's covered now," he says.

Ortho and implants

For the majority of employers, dental benefits are no longer merely a differentiator; 62% surveyed by NADP said they are an "essential" part of their benefit program.

In addition to enhanced benefits for medical conditions related to dental care, employers told NADP they are seeking the following plan features:

* Coverage of sealants (77%)

* Benefit rollover (76%)

* Adult orthodontia benefits (73%)

* Coverage for implants (72%)

* Coverage of cosmetic procedures (49%)

"We are seeing more of our competitors trying to expand the breadth of what the dental contract covers," McInteer comments.

"There's high interest in covering what's important to employers, including teeth whitening, adult fluoride treatments, oral cancer screening and periodontal maintenance as a preventive service," he says. "Dental insurance is such a competitive environment. Companies are trying to distinguish themselves and compete on product innovation."

Despite cost pressures, that's not likely to change, industry experts maintain.

"Dental is in a fantastic place because, unlike disability or life, it never became a commodity product where everything is alike so you have to compete on price," says Ameritas' Gustin. "With commodity products, companies start cutting back on benefits just to get a less-expensive product on the street."

Consumer-driven focus

About four years ago, some dental benefit providers began rolling out what they called "consumer-driven" products, designed to be more flexible and to reward employees who get preventive care and keep expenditures down.

"When I think of 'consumer-driven,' I think of a plan where the consumer participates in the financial decision and there are rewards and penalties," says McInteer. "There's an economic incentive to seek out good, appropriate care. Dental has always been that way. Preventive care is typically paid at 100%, and as things get more expensive, insurance drops down."

One of the most popular of the consumer-driven dental plan features is the maximum rollover, introduced by Ameritas and also offered early on by Guardian.

"Four years ago, Ameritas came out with a product that rewarded people who took care of their teeth," Gustin says. "If they had one visit to the dentist and used less than half of their maximum, we would roll over a portion of the remainder to the next year. This feature was criticized by carriers initially as being a big administrative burden, but almost all have copied it."

Aetna developed a consumer-driven plan a couple of years ago that uses financial incentives to encourage use of preventive care benefits.

"We see it as consumer engagement - getting members involved in their overall health," says Hirschberg. "When you go for preventive care, you are rewarded with higher-level benefits the next year. Depending on how the employer sets up the plan, the employee can get either a higher annual maximum or higher coinsurance coverage."

There has been an uptick in quoting and sales activity around this product lately, Hirschberg continues. "A lot of people are looking at this because it overlaps with medical engagement," he says.

Plan providers are also making products increasingly customizable. For example, Ameritas offers Fusion, a product for groups of 10 or more that covers dental and vision care. Employees can use their benefit schedule toward either or both types of care. Employers can tailor the plan to combine any or all of the following: annual maximums, deductibles and exam frequency.

"This is very consumer-driven because a family can decide exactly how it wants to use the benefits," Gustin says.

Last November, Aetna introduced i.Choose, a "personal benefits solution" initially offered for dental, life, accident and disability insurance purchased on either an employer- or employee-paid basis. Traditionally, voluntary plans are defined as benefits where employees pay at least 50% of the total premium; however, i.Choose can support any contribution percentage.

Dental FSA

The dental plan that perhaps most closely mirrors consumer-driven plans on the medical side is a new offering from Pendant Health in Dallas, a company launched last year by three dentists. Pendant Health provides employees with pre-funded debit cards to pay for dental care.

"The company founders saw a couple of things going on in the dental market," says President Nick Partridge. "Insurance is a pain to deal with and reimbursement rates are low, so dentists are leaving insurance networks or demanding high-fee reimbursements. Second, with health care premiums increasing at double-digit rates for most of the decade, a lot of employers have responded by shifting premium costs to employees. Those scenarios create problems for individuals and families looking for coverage."

At the same time, the founders were excited by consumer-driven trends in medical benefits.

"We thought, 'what if we took these principles to dental?'" says Partridge.

A high-deductible plan with an HSA didn't make sense for dental, says Partridge, because the average employee only spends about $300 a year for dental services, and only 5% of employees reach the maximum in their benefits in any given year.

"So given that, we felt that the best vehicle would be a flexible spending account with a debit card," he says. "Employers and employees contribute pretax dollars to the card, and all dollars that are unused at the end of the year go back to the employer."

Pendant Health has partnered with a network of 85,000 providers who provide discounts to card holders.

"The debit card isn't a schedule of benefits," Partridge asserts. "There's no stack of papers with limits and exclusions. The card sits in the employee's wallet with $500 or whatever amount has been put in, and there's a greater likelihood that person will use it."

Kevin Whitney, COO of Flexible Benefit Group, a third-party administrator in McKinney, Texas, agrees. He's impressed with the Pendant Health program.

"I've never been a strong proponent of dental benefits," Whitney remarks. "I believe that if people were to take their money and put it in a FSA, they would get more bang for the buck. Too many times, people forget they have a dental benefit. To pay $20 to $30 a month for something that costs $90 year is not a smart tradeoff."

Most employers don't want to stick employees with the full bill for dental insurance, says Scott Schoenvogel, CEO of Compass Professional Health Services, a Dallas provider of consumer-driven health care solutions.

"They want to feel like they are contributing at some level, but at the same time, they want to cap their risk," he says. "They don't want to give money over to insurers without utilization.

"Pendant Health came up with a very innovative model that puts a self-funding plan on top of dental network, so employers pay for services when they occur. I like it because it allows employers to manage dental costs a little better - they get network access at contracted rates, but in effect, they are self-insuring. It's a practical and fairly original solution."

Tamela Southan, a benefits broker and owner of Benefit Solutions By Design in Dallas, says the most appealing thing about the FSA-debit card approach is its flexibility.

"It's a custom design. You're not going to an employer and saying, 'Here's A, B and C, which plan do you want?' You're saying, 'Mr. Employer, tell me what you want to spend, and then we'll back into this,'" she says.

Despite their enthusiasm for the Pendant Health plan, Whitney and Southan admit that it hasn't been an easy sell.

"I've gotten very close on several accounts," says Whitney. "But there is skepticism - employers look at projected savings and don't quite believe it.

"I relate it back to when we first offered HRAs; employers were very skeptical then, too. We'd show them savings of $20,000 to $40,000 a year with no reduction in benefits, and they would not believe us."

Notes Southan: "Many employers don't know what they want to offer in the way of dental, they just know they want a benefit. And they are used to the traditional approach. They don't know that less than 5% [of plan members] actually worry about that maximum benefit. When looking at renewals, most stay at the preventive level. We have to educate employers on benefit utilization."

The future is choice

What does the future look like in dental plan design?

"I think companies will continue to tweak existing products to offer at lower price points," says Hirschberg.

"Dental is no longer just 'take it or leave it,'" indicates McInteer. "Plans with choices for consumers are very, very popular. When I say 'choice,' I mean having a suite of products available that enables employees to upgrade coverage however they choose. For example, the employer might pay for a $1,000 maximum benefit, and the employee has the option to buy more coverage."

Choice - in benefits and cost, for employees and employers - is the key, dental experts agree.

"This generates lot of satisfaction," McInteer says. "One dental plan is not best for everyone."

Dental demand and coverage

89% the percentage of consumers who receive regular dental care, with the majority seeing their dentist twice a year or more.

60% the percentage of consumers who have dental.

29% the percentage that pay out of pocket for the care they need.

6 million the number of at-risk consumers who defer the dental care they need.

Source: Delta Dental Plans Association.

Gresham is a senior editor for EBA and Employee Benefit News and also director of benefitnews.com.

http://www.eba.benefitnews.com/

May 1, 2009