Dental Insurance Reimbursement

It has widely been accepted that insurance benefited the dental profession by allowing patients to receive treatment that they might not be able to afford on their own. With the cost of coverage escalating, many dentists question whether insurance is still the asset that it once was. Some have even begun to wonder if insurance should be involved in dentistry at all. The Insurance Companies have responded by promoting Preferred Provider Plans (PPO`s) and HMO`s which eliminates your employees freedom to pick their own health care professional and drastically reduce payments to providers resulting in long waits for dental appointments and less than satisfactory dental care.

Insurance, by definition, protects against a potentially catastrophic loss that is impossible to predict. That's why you need life insurance, medical insurance and long term disability insurance. But dental treatment is highly predictable and non- catastrophic. It's prevention orientated. It involves frequent claims of relatively small dollar amounts. Most dental plans sold by insurance companies, have an annual maximum benefit of $1000 or $1,500. It is clear that they are not designed to protect against catastrophic expenses, but to assist you with routine expenses. Since dental benefits aren't really insurance, it's not necessary to involve insurance companies in the dental benefits loop. You don't need to insure a routine expense that is predictable and budgetable. Insuring yourself for dental expenses is like insuring against haircuts or utility bills!.

According to the American Dental Association only 50-60% of people who have dental benefits ever visit the dentist in a given year. Less than 5% who have dental plans with a $1000 annual maximum benefit actually reach the maximum benefit each year. The average dental expenditure per person in the United States is less than $160 a year. Less than 5% of the total health care dollar is spent on dental treatment. Many don`t realize that 50% of the dentistry performed in this county is still paid for out of pocket by the patient. Yet, in spite of these figures, many employers still believe that they need the security of an insurance company in order to provide a dental benefit for their employees.

What many fail to realize is that an insurance company costs (overhead and profits) can consume up to one third of the premiums an employer pays for a traditional dental plan. By being self insured or self funding you eliminate the insurance company and many of the expenses associated with it, resulting in a savings of 19 -29 percent compared to many fully insured plans.

A self funding company has two ways to administer dental benefits. Implement a company traditional dental insurance plan which would need to be handled by a third party administrator with administrative costs between 7% to 14%, or a direct reimbursement (D.R) plan which would reimburse the employee a percentage of the dental services rendered. D.R. which is strongly supported by the American Dental Association shows administration costs of 3.5% to 7.5%, about one-half of the administration cost of a traditional self-funded plan.

Direct Reimbursement (D.R.) is a simple method an employee can use to provide dental benefits for their employees without an insurance company involvement. The employer selects or customizes a reimbursement plan that suits their budget or needs. Benefits are typically stated in dollars as a percentage of the expenses incurred, up to the limit of an annual maximum which is determined by the employer. Employees visit the dentist of their choice and pay for the treatment they receive. They then present a paid receipt to their employer who reimburse them for all or part of the expense incurred. Below is an example of a D.R. plan

This method ensures that the plan pays only for actual dental services received, that employees go to the dentist of their choice, and that virtually all of the monies spent go for dental treatment. The variation of the different plans is limited only by the degree of financial commitment the employer is prepared to make. An employer may begin its plan by offering a conservative annual maximum, and then revise the benefits level at any time.

As dentists we are constantly sandwiched between the Patient and the Insurance Companies. In many situations treatment rendered is tailored around what benefits are covered, which may not be in the patients best interest. Patients should be able to receive treatment that best meets their needs without third party intervention. Direct Reimbursement emphasizes direct employee to employer, patient to dentist relationship. Employers realize savings by eliminating costs due to complicated claims adjudication, service restrictions and exclusions, participating provider lists and insurance company profits. Besides the cost savings, the D.R. concept usually means an increase in benefits to the employees. Traditional plan designs contain deductibles, waiting periods, UCR limitations and excluded procedures that dramatically reduce the benefits available to employees. D.R. plans eliminate most of the limitations that reduce benefits. Most traditional plans reimburse on average 54% of the patients actual expense, while employees covered by D.R. plans are covered between 64% to 77% of their actual expense. The higher benefit levels are affordable to the employer as a result of the reduced administrative fees and the employee's prudent use of dental services.

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