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Dental Benefit Plans
Buyers Guide to Dental Benefits
Fully Insured Indemnity
Characteristics
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A defined benefits plan with a fixed monthly premium.
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Benefits vary, but most pay 100% for preventive care (cleanings, exams, check-ups); 80%
for basic services (fillings, root canals); 50% for major work (crowns,
dentures)
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Benefits are limited to an annual maximum, usually $1,000 $1,500.
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Normal annual deductibles are $25 -
$50.
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Orthodontics, if covered, are paid at 50% and are usually limited to a $500-$1,500 lifetime maximum benefit.
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Advantages
Freedom of Choice.
Employees may choose their own dentist, including specialists,
and may change at anytime.
Predictable
Cost.
Fixed monthly premiums are usually guaranteed for 6-12 months.
Simple Administration.
Dental offices usually file claims, and benefits can be paid
directly to the dentist.
Disadvantages
Expensive.
This is the most expensive type of dental plan.
Confusion. Benefits are sometimes difficult to understand. Some procedures are
excluded, others require wafting periods. Benefits paid based on UCR Schedules are
sometimes less than the dentist's actual fee, and fees may vary.
Lack of
Accountability.
Few carriers provide employers with claims experience data
so cost-effectiveness is often hard to determine.
Purchase Considerations
- Carefully compare plans. Because benefits vary, evaluation is complex.
- Check the UCR Schedule-how often is it updated?
- Check the UCR Percentile-the higher the percentile, the better the benefits coverage.
- Ask if the carrier provides claims experience reports. They are helpful in monitoring cost-effectiveness.
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Self-Insured Indemnity
Characteristics
- Similar to fully indemnified plans with one major exception: the employer bears sole financial responsibility for the benefits provided.
- Premiums paid are actually deposits made by employer into a trust fund.
- A third party administrator (TPA), often an insurance company, uses trust funds to pay claims and operational costs.
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Advantages
Freedom of
Choice.
Employees choose their own dentist, including specialists, and
may change at any time.
Cost Savings.
Since the TPA assumes no risk, self-insured plans often are 10%-20%
less expensive than fully-insured plans.
Simple Administration.
Dental offices usually file claims, and benefits can be paid
directly to the dentist.
Accountability.
The employer receives regular claims experience reports detailing
claims and administration costs. This gives the employer greater accountability.
Disadvantages
Less
Predictable. Employer costs are not fixed. Expenses vary month to month
depending on utilization.
Confusion.
Benefits can be difficult to understand. Self-insured plans usually include
the same restrictions, exclusions and UCR limitations as fully-insured plans.
Purchase Considerations
- Choose a reliable administrator. Ask for references.
- Compare plan designs and ask about the TPA's use of UCRs.
- Check the UCR Schedule-how often is it updated? Check the UCR Percentile-the higher the percentile, the better the benefits coverage.
- Compare the fees charged for TPA services; they can vary greatly. Make sure the rate is competitive. Exercise caution it proposed rates tall inordinately below those of competitors.
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Preferred Provider Organization (PPO)
Characteristics
- PPO plans appear similar to indemnity plans, but differ in that PPOs contract with individual dentists who agree to treat PPO patients, usually at discounted rates.
- As a general rule, treatment must be delivered by a participating provider (PPO dentist).
- In PPOs that allow patients to receive treatment from a nonparticipating dentist, patients will be penalized with higher deductibles and co-payments. PPOs can be fully-insured or self-funded.
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Advantages
Cost Savings.
PPOs usually are less expensive than comparable indemnity plans.
Predictable
Co-payments.
PPO contracts can limit the co-payments dentists are
allowed to charge patients, thus reducing the chance of unexpected out-of-pocket
costs.
Disadvantages
Limited Choice.
If patients have an existing relationship with a non-participating
dentist, they must change dentists to receive full benefits. This may discourage
patients from seeking preventive care, which could result in the need for more
extensive, costly procedures in the future.
Confusion. Like other indemnity plans, benefits may be confusing to employees.
Purchase Considerations
- Determine the number of participating dentists in the areas where employees live and work.
- Select a plan that allows employees the option of going to a non-participating dentist.
- Inquire about the penalties that may apply when employees see a non-participating provider.
- Determine the access the plan provides to dental specialists. Some plans limit referrals to specialists.
- Request a copy of the contract the PPO has with its providers. It may detail the types of treatment your employees are entitled to receive from the plan.
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Dental Health Maintenance Organization (DHMO)
Characteristics
- Based on the medical HMO concept, employees select a primary care provider from a list of participating providers.
- Employees receive all treatment from this primary care provider, unless, the dentist authorizes a referral to a specialist.
- Most DHMOs provide preventive care at no charge. Other services may require co-payments.
Unlike indemnity plans, in which dentists are paid for the treatment provided, DHMOs pay participating dentists a monthly capitation (per head) fee for each patient assigned to the practice. These plans are sometimes referred to as "pre-paid," with the dentist assuming the financial risk.
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Advantages
Cost Savings. DHMOs offer the least expensive dental plans. Theoretically, the
DHMO rewards dentists who keep patients in good health, thereby keeping treatment
costs low.
Predictable Co-payments.
Low or no co-payments are required for routine
treatments.
Disadvantages
Limited Choice.
Like PPOs, DHMOs may require patients to change dentists in
order to receive benefits.
Dentist Turnover.
Turnover in DHMOs is often high. Employees may have difficulty
establishing a long-term relationship with the dentist.
Limited Access. If the DHMO is under-funded, a dentist may limit the number of
DHMO patients seen each month. Patients may have difficulty scheduling
appointments.
Quality. Under-funded plans may adversely affect quality of care by shifting
emphasis from quality of service to cost containment.
Hidden Costs. Non-routine or expensive procedures may require substantial patient
co-payments or not be covered at all.
Purchase Considerations
- Make sure the DHMO has dental offices in your area.
- Visit the offices and meet the dentist providers. Ask about waiting periods required for DHMO patients to receive appointments.
- Ask about the dentist turnover rate.
- Determine the access the plan provides to dental specialists. Some plans limit referral to specialists.
- Note procedures not covered by the plan. Some plans are designed so that the dentist profits most when the patient must pay out-of-pocket for uncovered treatment procedures.
- Request a copy of the DHMO's contract with the dentist. It may detail the treatment your employees are entitled to receive.
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Direct Reimbursement (DR)
Characteristics
- A self-funded concept through which employers pay dental benefits to employees without insurance company involvement. Benefits are stated as an annual dental expense allowance usually $500 - $1,500 per employee.
- Employees receive treatment from the dentist of their choice. Employees pay the dentist directly and submit a reimbursement request to the employer or third party administrator (TPA).
- The employer or TPA reimburses the employee based on a pre-determined rate, not exceeding the annual maximum benefit allowances.
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Advantages
Freedom of Choice.
Employees choose their own dentist, including specialists, and
may change at any time.
- Employees have more control of how they use their benefits dollars.
- Most DR plans have few, if any, treatment restrictions or exclusions.
Administrative costs are low.
- DR is often 25%-35% less expensive than fully-insured indemnity plans.
- Almost all monies go to benefits.
- Benefits are simple and easy for employees to understand.
- Employees are directly involved in the payment process, an effective means of cost control.
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Disadvantages
Out-of-Pocket Cost. Employees usually pay the dentist directly and are reimbursed
by the employer or TPA. This may inconvenience some employees.
Less Predictable. Costs vary from month to month depending on plan utilization.
Purchase Considerations
- DR plans may not be recommended by insurance brokers because they eliminate third party profits and commissions.
- Self-funded benefits plans such as DR are regulated by the U.S. Department of Labor. Your plan must be in writing and should be reviewed by your attorney.
- To receive information on DR plans, contact the California Dental
Association
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1995-2001 California Dental Association. All Rights Reserved.
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