General News

Employees can get accustomed to consumer-driven programs through ancillary products. Self-funded, direct reimbursement dental plans emerged in 2002 as the hottest new alternative in the marketplace. Recently versions of these plans have been profiled in industry magazines.

The resurgence in direct-reimbursement is due, in large part, to the fact that employers are looking for the consumers to participate in cost savings with the hope of offsetting their double-digit rate increases.

Some consumer-driven, self-funded dental plans have been in place for up to five years. Rates over the past five years have remained remarkably stable and significantly less then their traditional fully insured counterparts in many cases. This is not proof that consumer- driven products will work across the board, but it does speak well for them as they apply to dental.

Dental programs were originally designed as budgeting mechanisms that promoted preventive care and offset the out-of-pocket costs of more expensive procedures. Now insurance products are getting to a point where some have called their cost benefits into question.

Unlike traditional insurable events, dental care is predictable and the employers' maximum exposure is limited. This opens the door for direct reimbursement products.

For the consumer, direct-reimbursement have many advantages over more traditional plans:

* Dollar-based plan designs are easier for the consumer to understand.
* Dollar-based plan designs significantly reduce administrative costs and claims problems.
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Direct reimbursement plans are based on dollars spent on care, rather than on the type of treatment received.
* Far fewer restrictions are placed on treatments.
* There is no U&C, therefore there is no balance billing.
* Employees can easily calculate in advance what their out-of-pocket expenses will be when coordinating with a 125 program.

Many employers value the cost-saving aspect of direct reimbursement, but are leery of heavy administrative demands. Several employers are using third party administrators to outsource administrative issues and avoid legal problems.

Self-Funding Done One Better
A number of producers are variations on the direct-reimbursement theme. A third party administers them. One no-risk, self-funded, direct-reimbursement product allows organizations that normally would not be candidates for self-funding to offer a "no-risk" program on an employer-funded or voluntary basis.

Direct reimbursement offers significant cost saving for employers and offers more freedom and richer benefits for employees. The key benefits of direct reimbursement lie in the fact that a much greater percentage of every dollar goes to care - 80% to 85% versus 60% to 65% in most traditional plans.

The intent of consumer-driven products is two-fold – to control costs and to give patients more control of their care. The past 20 years have shown that managed care has not worked. Costs for care continues to climb as do the number of people requiring that care. Also, patients are growing more disillusioned with insurance companies.

In a recent report, the National Association of Dental Plans and Delta Dental Plans Association predicted a jump of almost 20 million new dental lives, or 11 % growth, over the next three-and-a-half years. California will dominate the US market, with almost 26 million total enrollees.

At the same time in a report recently published by Golin/Harris International, consumers ranked insurers as one of the most untrustworthy industries.

The report goes on to say that customer expectations and satisfying them consistently is the key. Here are a few of respondents' comments regarding the insurance industry:

"With all their limitations and qualifiers, they make it nearly impossible to understand what it is they are offering. Double-talk, not paying their portion of bills, slow to respond.”

“I have been carried by several different insurers and have found that I have had to fight for my coverage. Even the most basic claims have been returned for ‘more information.' I believe that most insurance companies simply make it hard to collect so you will eventually just give up and pay the bill yourself."

Consumer driven, dollar based, direct reimbursement plans offer a great opportunity to improve the industry's image and alter the general public's perception because the patient is in charge of his or her care. Also, with reimbursement plan there are far fewer treatment limitations and exclusions.

On the following page are essential of consumer-driven, dollar-based, direct reimbursement plans that help resolve the situation problems described above:

Problem: Dollar-based, direct reimbursement plans are not insurance.
Solution: By eliminating risk management fees self-funded programs save clients 20% to 25% and put the consumer in control of managing care.

Problem: Consumers don't trust carriers to make treatment decisions that are in their best interest.
Solution: Because direct reimbursement plans are dollar based they don't control procedures.

Problem: The plan is confusing to deal with.
Solution: Dollar-based, direct-reimbursement plans eliminate or drastically reduce plan limitations and exclusions. Dollar- based, direct-reimbursement plans are simple and easy to deal with and are designed to reduce or eliminate the main confusion consumers have with their dental plans, such as what's covered and when.

Problem: Plans are slow to respond and make it hard to collect so the consumer gives up.
Solution: Administration is one of the few functions that is outsourced. With dollar- based plans, an administrator's function is limited to reimbursing for expenses. Some even offer electronic reimbursement into the consumers checking or savings account for immediate response.

Problem: Claims are returned for more information.
Solution: Direct-reimbursement plans are easy for employees to understand. Reimbursements are made according to the plan design. There are no questionable decisions involved when processing claims.

Education Is Our Biggest Challenge Education needs to start with our own notions of what our clients are looking for. Sometimes agents and brokers are hesitant to present a consumer driven, direct-reimbursement option because they think that their clients might not understand it. The reality is that consumers understand reimbursement for dollars spent. In contrast, few employees understand the technical elements of their current benefits schedule. Clients who use a direct-reimbursement product, express their satisfaction by staying with the plan. Retention with direct-reimbursement plans is between 90% to 95%.

Here are a few additional points: consumers are unhappy with the status quo; managed care has not lived up to its promise of controlling costs; consumer-driven products are on the horizon; and it is a great first step to prepare your clients for that transition with an ancillary product, like dental.
A number of products are variations on the direct-reimbursement theme. They are administered by a third party and offer features that purely self-funded plans don't offer. There are a handful of self-funded, direct reimbursement products in the marketplace that offer organizations "no risk" versions on an employer-funded or voluntary basis. These products offer a sure-fire way to improve perception and leverage the growth opportunity in the marketplace.