Slide 1 - PENJERDEL Employee Benefits

Dental Benefits 101

January 30, 2008

Presenter: Sara Zook

Today’s Topics

A Brief History Description of Types of Plans

• Indemnity

• HMO

• PPO

Network Considerations Reimbursement Differences

A Brief History

A Brief History The dental benefits industry in the U.S. began

as a by-product of the health insurance industry.

1954- Nation’s First Dental Plan- Washington State Dental Service Corporation.1

In 1962, 1 million people (less than 1% of U.S. Population) were covered by dental benefits.2

By 1999, 153 million individuals (56% of U.S. Population) had some type of dental benefits.2

(1) Journal of Dental Education, Future Trends in Dental Benefits, 2005 69: 586-594

(2) Mayes, Donald S., Dental Benefits: A Guide to Dental PPOs, HMOs and Other Managed Plans, Revised Edition: 2002.

Dentists Practice Differently

Most Dentists practice individually• MDs- 35% practice individually1

• DDS- 76.6% practice individually2

Dentists do not require hospital privileges

What does this mean?

(1) Medical Economics, “Do you have the right stuff to go solo?,” Jan. 8, 2001; (2) Journal of Dental Education, Association Report: Trends in Dentistry and Dental Education, June 2001

Dental Cost Pressures Are Increasing

Lost work time• Over 164 million work hours (approximately 20.5 million days) and

51 million school hours (approximately 7.8 million days) are lost each year due to dental problems1

• Production time lost due to off-the-job injuries totaled about 170 million days; 80 million days were lost by workers injured on the job2

Emergency room costs• People in the 19 – 35 age group have more emergency room visits

for dental emergencies than medical emergencies3

• 80% of dental-related emergency room discharges receive prescription for at least one medication3

(1) U.S. Department of Health and Human Services. Oral Health in America: A Report of the Surgeon General. Rockville, MD: U.S. Department of Health and Human Services, National Institute of Dental and Craniofacial Research, National Institutes of Health, 2000; (2) Injury Facts 2003 Edition, National Safety Council; (3) Lewis, Charlotte, MD, MPH, Lynch, Heather MD, and Johnston, Brian, MD, MPH, Dental Complaints in Emergency Departments: A National Perspective, Annals of Emergency Medicine, Volume 42, Number 1, July 2003

Indirect costs of dental problems

Types of Plans

Types of Coverage1

Capitated Dental Plan Pure DHMO

• Dentist paid on a per capita basis, fixed rate for each individual or family enrolled.

• Participant must see a DHMO dentist for coverage. • Typically smaller networks. • Copay schedules.

Fee-For-Service Dental Plans Indemnity

• Reimbursement based either on a schedule or UCR. • No network.

PPO• Network of dentists agreeing to accept a discounted level of payment for

covered services. • Out of Network option, plan design/carrier determines reimbursement level. • Typically larger networks.• Uses coinsurance.

(1) Mayes, Donald S., Dental Benefits: A Guide to Dental PPOs, HMOs and Other Managed Plans, Revised Edition: 2002.

Dental Plan Trends

15.1

60.5

40.8

5154.2

58.9

54.360.7

6569.7

80.2

26.623.7 23.5 23.6 23.2

11.611.911.313.2

0

10

20

30

40

50

60

70

80

90

2000 2001 2002 2003 2004

Indemnity Plans

PPO Plans

DHMO Plans

Access/Discount Plans

(1) National Association of Dental Plans. 2005 Joint Dental Benefits Report, Enrollment, July 2005; (2) The significant decline in Access/Discount plans between 2000 and 2002 was impacted by the removal of some health plans previously in this category that included a limited dental benefit.

PPOs are the only segment with significant growth over this four-year period1

Plan Design Components

Coinsurance Plan maximums

• Annual Max and Orthodontia Lifetime Max

Deductibles Allocation of services

• Preventive (Type A/I): Cleanings, Routine X-rays

• Basic Restorative (Type B/II): Fillings, Periodontics, Oral Surgery, Endodontics

• Major Restorative (Type C/III): Crowns, Bridges/Dentures

Contractual Limitations and Exclusions

HMO- A Sample Plan Design

Deductible $0

Preventive $0

Basic Restorative

(i.e. fillings)

Copay Schedule, ranges from $20-$90

Major Restorative

(i.e. crowns)

Copay Schedule,

ranges from $350-$475

Orthodontia $2,500-$3,900

Annual Maximum None

Indemnity Plan Design

TYPE OF SERVICE (% R&C)

A (Preventive) 100%

B (Basic Restorative) 80%

C (Major Restorative) 50%

D (Orthodontics) 50%

PPO Plan Designs – “Classic” Plan

TYPE OF SERVICE

IN-NETWORK (% PDP fee)

OUT-OF-NETWORK (% R&C)

A (Preventive) 100% 100%

B (Basic Restorative)

80% 80%

C (Major Restorative)

50% 50%

D (Orthodontics) 50% 50%

PPO Plan Designs – “Maximum Allowable Charge (MAC)” Plan

TYPE OF SERVICE

IN-NETWORK (% PPO fee)

OUT-OF-NETWORK (% PPO fee)

A (Preventive) 100% 100%

B (Basic Restorative)

80% 80%

C (Major Restorative)

50% 50%

D (Orthodontics) 50% 50%

This plan is not available in every state on a fully insured basis. Please check with an advisor prior to offering.

PPO Plan Designs – “Incentive Plan”

TYPE OF SERVICE

IN-NETWORK (% PPO fee)

OUT-OF-NETWORK (% R&C)

A (Preventive) 100% 80%

B (Basic Restorative)

80% 60%

C (Major Restorative)

50% 30%

D (Orthodontics) 50% 50%

This plan is not available in every state on a fully insured basis. Please check with an advisor prior to offering.

PPO Plan Designs – “Incentive MAC Plan”

TYPE OF SERVICE

IN-NETWORK (% PPO fee)

OUT-OF-NETWORK (% PPO fee)

A (Preventive) 100% 80%

B (Basic Restorative)

80% 60%

C (Major Restorative)

50% 30%

D (Orthodontics) 50% 50%

This plan is not available in every state on a fully insured basis. Please check with an advisor prior to offering.

No coinsurance differentials are permitted: No distinction can be made in- and out-of-network coinsurance / benefit

Size of differential is restricted: Size of coinsurance / benefit differential in- and out-of-network is limited

Coinsurance / benefit differentials are permitted: These states are silent on the subject of coinsurance / benefit differentials

Oregon

Montana

Idaho

Wyoming

North Dakota

South Dakota

Minnesota

Nebraska

Kansas

Oklahoma

Texas

New MexicoArizona

UtahNevada

California

Colorado

Iowa

Missouri

Arkansas

Louisiana

Mississippi

Alabama

Tennessee

Georgia

Florida

South Carolina

North CarolinaKentucky

OhioIndiana

Illinois

Michigan

Wisconsin

West Virginia Virginia

Pennsylvania

New York

New Jersey

Maine

VT

NHMA

CT

Rhode Island

DelawareMarylandWashington DC

Extraterritorial states include:MA, MS, MT and TX.

Washington

STATE LIMITATIONS ON INSURED PLANSCOINSURANCE DIFFERENTIALS

Allocation of Services

Orthodontic diagnostics

Orthodontic treatment

By reallocating these services, you could save 11%*

*Percentage indicates plan savings off of MetLife’s full block of self-funded/insuredPPO plans based upon analysis of MetLife’s 2004 book of business.

Type CProsthodontics

Inlays/onlays Crowns Dentures Bridges Implants Endodontics/

root canal Periodontics–surgery Oral surgery Simple extractions Surgical extractions

Type DOrthodontics

Type BRestorative

Fillings Repairs Periapicals Pulp capping/

pulpal therapy Endodontics/root canal Space maintainers Palliative care Periodontal maintenance Periodontics Rebases/relines Simple extractions Surgical extractions Oral surgery General anesthesia Consultations

Type APreventive & Diagnostic

Oral exams Full mouth X-rays Bitewing X-rays,

periapicals & other X-rays

Lab and other tests Prophylaxis (cleaning) Fluoride treatments Space maintainers Palliative care Sealants

Note: Options may be subject to state regulations.

Type A, B, C & D covered services

Potential savings of 3.5 – 5%*

*Range indicates plan savings off of MetLife’s full block of self-funded/insured PPO plans based upon analysis of MetLife’s 2004 book of business.

Fluoride ageOnce per 12 months

Space maintainer ageOnce per lifetime

Periodontal maintenanceCombined with cleaning

Prosthodontic services

Sealant ageOne per 60 months

Fillings

R&C Percentile

ImplantsOne per 60 months

Up to age 14

Up to age 14

2 per year

1 in 10 years

Up to age 14

1 per 24 months

80th

Not covered

More RobustMore Robust Lower CostLower CostAlternativesAlternatives

Up to age 19

Up to age 19

4 per year

1 in 5 years

Up to age 19

No limit

90th

Covered

Note: Options may be subject to state regulations.

Limitations and Exclusions

• If the Current Contract Is “Open,” Is the Quote “Closed”?Estimated Price Impact = 1% to 3%

• Does the Quote Include Asymptomatic or Naturally Functioning Tooth Limitations? If So, How Are They Applied?Estimated Price Impact = 2% to 3%

• Are All Endo., Perio. and Oral Surgery Services in One Category (e.g., Type B) or Are They Split Among Categories (e.g., Type B & C)?Estimated Price Impact = 5% to 25% (8% if 100/80/50)

• If the Current Plan Is R&C Based (out-of-network), Is the Quote R&C Based? Is R&C Calculated the Same Way?Estimated Price Impact = 0% to 20%

SOURCE: Estimates are based on MetLife data.

Other things to look for

– Oral Examination – Oral Examination (hard/soft 6 months?)(hard/soft 6 months?)– Fluoride Treatment – Fluoride Treatment (consecutive months?)(consecutive months?)– Prophylaxis (cleaning) – Prophylaxis (cleaning) (combined w/ Perio.?)(combined w/ Perio.?)– Sealants – Sealants (per tooth; per lifetime?)(per tooth; per lifetime?)– X-Rays – X-Rays (bitewings only / consec. months?)(bitewings only / consec. months?)

– Oral Surgery – MinorMinor Oral Surgery– Fillings – Fillings (replacement limits?)(replacement limits?)– Endodontics – X-Rays X-Rays (all other / limits?)(all other / limits?)– Periodontics – Endodontics (pulp caps)(pulp caps)

– Periodontics (non-surgical / limits?)(non-surgical / limits?)

– Prosthetics – Endodontics Endodontics (root canal therapy)(root canal therapy)(bridges, dentures) – Periodontics Periodontics (combined surgical limits?)(combined surgical limits?)

– Crowns, Inlays, Onlays – Complex Oral Surgery Complex Oral Surgery ((asymptomatic tooth exc.?)asymptomatic tooth exc.?)– Prosthetics (bridges, dentures)

(naturally functioning tooth exclusion?)(naturally functioning tooth exclusion?)– Crowns, Inlays, Onlays (Implants / Alt. Benefit?)(Implants / Alt. Benefit?)

Type I – Type I – PreventivePreventive

Type II – BasicType II – Basic

Type III – MajorType III – Major

What You See What You May Get

Closed or Open List?Closed or Open List?

Adding it all together…

Multi-Option Strategies

A recommended dual-option approach:

• Cover the same services in both plans

• Design differences including:– Both plans should be attractive to the entire population to help avoid

adverse selection

– Low plan should include greater cost sharing features

• Lower plan must deliver significant value at an attractive price

Promote high participation and maximize participation in each plan to avoid adverse selection

Voluntary Strategies

A recommended approach:

• Plan design:– Focus on preventive and diagnostic services

– Primary allocation of services

– Greater degree of cost sharing for major services

– Two-year participant plan selection lock in/lock out

Promote high overall participation by keeping rates attractive to most employees (high and lower utilizers)

Retiree Strategies

A recommended approach:

• Plan structure– Offer coverage to individuals who have had coverage as an

active employee

– Pension deducted payments

• Plan design– Focus on coverage designed to maintain oral health

Promote participation through one open enrollment opportunity, no late entrants

Reimbursement Differences

Types of Reimbursement PPO Fee

• Discounts can vary widely, especially when multiple networks involved

• Can be used as reimbursement both in and out of network

• Discounts are sometimes applied to non-covered services, amounts above the maximum, etc.

R&C/UCR• The administrator’s determination of an out of network

average/reimbursement. Separate fee schedules for General Dentists and

Specialists• Services performed by a specialist (i.e. Perio, Endo, Oral

Surgery) at a rate of 70%

R&C (Reasonable & Customary), UCR (Usual, Customary, & Reasonable)

For example, MetLife uses the lesser of three things:• The dentist’s Actual submitted charge

• The dentist’s Usual charge

• Customary Charge (geographic area)

Customary Charge based on a percentile (51st, 70th, 80th, 90th, 99th)

Reasonable & Customary- Variances

One administrator’s 90th percentile may not necessarily equal another’s• Differences in definition of geography

• 3-digit zipcode

• Region

• State

• Use of only In Network Charges to determine percentile vs. All submitted charges• Using “In Network Only” leads to lower

reimbursement out of network

Network Considerations

What Is the Goal of a Dental Network?

To be effective, a network needs to accomplish four essential things:

• Lower benefit plan costs

• Increase plan participant satisfaction

• Promote a healthier, safer environment for patient care

• Enhance dental practice efficiencies

Retention: What is Turnover?

Two types of turnover• Voluntary

• Involuntary What is a reasonable amount of

turnover? (5%, 2% is ideal)• Turnover rate for individual PPO dental offices

was 9.0%*• PPO general dentists was 7.9%*

• PPO specialists was 4.7%*

*NADP, 2004 Dental Benefits Report on Network Statistics, August 2004 (dentists or offices that left a network from 01/01/03 through 12/31/03

Questions?