Discount dental plans have, for decades, been on the fringes of the benefits world, existing as an individual product almost exclusively. But as employers continue to shift costs, move to consumer-driven health plans and, in some cases, discontinue dental coverage altogether, voluntary discount dental plans could be poised for growth.
There are a lot of misconceptions about discount dental plans, says Jennifer Stoll, president of DentalPlans.com, one of the nation's largest discount dental plan providers. "I don't think people know enough about what it is and how they work," she says.
They work like this: Most dental plans are tied to a provider network. Insurance companies sign contracts with provider networks to reduce the cost of claims. If the normal claim cost for a dental procedure is $100, for example, insurance companies contract with providers to get that procedure at, say, $60. Discount plans do exactly the same thing. They use those same networks to get the discount but instead of the insurance company paying the claim, the member pays the dentist directly.
"You're buying access to the network and for that, you're getting discounts on your dental or vision care," explains Peter Kopp, president and CEO of Solera, an insurance and financial services brokerage firm based in Colorado.
Members of a discount dental plan generally pay an annual membership fee. With DentalPlans.com, the annual fee is about $130, says Stoll. For groups, the membership fee can be paid monthly through payroll deduction. Employers can choose to pay all of the cost, a portion of it, or none of it.
"However, one of the benefits of doing the annual [membership fee] is that we can create a sign-up process that really makes it so easy for the HR director or whoever is managing the benefits," says Stoll. "We can create a mini-website where their employees can go and sign up directly for the plan that's best for them."
And whereas insurance plans typically have exclusions, limitations and waiting periods, discount dental plans don't.
"Every insurance plan has exclusions and limitations, whether it's a deductible, an annual maximum or a waiting period of some kind, or a limit on the number of procedures," says Brian Watts, executive vice president, First Dental Health. "So when you look at those limitations, a discount plan, in theory, can provide a way for employees to save money on all those services."
But Kopp maintains that, in most cases, dental insurance is still a more appropriate benefit for employers because "you can get dental insurance plans that are priced in the same ballpark as discount plans, that offer a better benefit." And, he says, restrictions related to insured products often aren't as restrictive in an employer setting.
"One of the big reasons people go with discount plans is because of all the restrictions related to insurance products. But for employers, there are a lot of laws in place that eliminate a lot of those restrictions," he says.
Still, as more employers travel the road of consumer-driven health and have fewer health care dollars to spend on employees, discount dental plans might provide a viable option. They're cheap, and they still enable employers to offer a benefit.
"We do see a trend that traditional dental insurance programs that have been paid for in the past - there's an erosion in that market because employers don't have the dollars available," says Stewart Sweda, chief sales and marketing officer with Careington, a marketer of dental, medical, health and lifestyle discount plans. "With a discount program, you have the ability to still have an employer-paid benefit because a discount program is affordable."
Careington sends its members a set dental fee schedule and "that becomes their price list when they choose one of the contracted dental providers that we have throughout the country," says Sweda.
One of the biggest challenges for the dental discount industry is consumer and employer perception. We're all conditioned to need insurance - home insurance, life insurance, car insurance, health insurance - when dentistry is not necessarily an insurable event, says Watts. "All those other items are coverage for catastrophic, unpredictable events. Dental is a very predictable event and very preventive," he says. "So one of the challenges is employees, and perhaps even HR departments, perceive that dental insurance is a better benefit than discount."
Purchasing behavior will change, Stoll believes, as employees take on more personal responsibility for their health care. "Our model is choice, our model is people coming to our site and having that choice factor, having all those plans together in one place and allowing people to choose the plan that's right for their needs," she says.
Health care reform, meanwhile, could present a further opportunity for the discount dental industry. Under the Patient Protection and Affordable Care Act, children's dental coverage will be segmented from parents' coverage. Because of the costs associated with dental insurance, parents may choose to forgo coverage for themselves. "That's when discount plans might be the best option for those people because it's the least expensive and has the most flexibility," says Watts. "Discount plans are in the perfect position to fill that gap if parents decide to drop coverage for themselves but keep it for their kids."
DISCOUNT DENTAL PLANS VS. FULLY INSURED PLANS
Discount Dental Plans
Fully Insured Dental Plans
* Lower cost
* No annual limits on use
* No waiting period -- discounts usually activate within a few days, if not immediately
* Available directly to individuals, families, businesses and other groups
* Discounts may be available for cosmetic procedures like teeth whitening and veneers
* No claims to file
* Member bears all risk and financial responsibility for dental treatment and still pays a periodic fee for accessing the network and may pay an enrollment or billing fee
* Remaining discounted cost of visit may still be a barrier to obtaining preventive services
* Specified network of dentists that have agreed to provide services at discounted prices, usually smaller than insured Preferred Provider Networks
* No out-of-network benefit
* No limits or claim reviews, which can result in no quality assurance or patient advocacy for over-utilization
* Little to no state regulatory scrutiny in most states
* More financial benefits like no cost for preventive visits (cleanings and checkups) and carryover benefits
* Covers percentage of cost of many expensive procedures in addition to in-network discounts
* Usually covers some portion of covered services performed by out-of-network dentists
* Even greater value if employer- paid in whole or in part
* Some plans offer screenings for oral cancer, extra cleanings for pregnant women and diabetics
* Claims review process can catch billing errors an average person may not notice
* Upfront cost (in premium)
* May require waiting periods to start utilizing benefits for lowest cost plans
* Limitations or exclusions. Not all services are covered.
* Frequency limitations
* Annual cap on insurance benefit
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