Dental plans -- particularly affordable dental plans -- are among employees' favorite benefits, but if not properly designed, they often cost $35/month for single employees and $130/month for families -- or more. Employers needn't pay that much.
By understanding and utilizing available plan design options, employers can lower those costs by as much as 40-50% and create an affordable dental plan. Correct dental plan design is more than just getting quotes for dental insurance -- the impact of the plan design makes a huge difference in affordability.
This article explains how dental plans operate, describes the plan options available, and suggests strategies to make for more affordable dental.
Annual Maximum Benefit
All plans have an annual limit on benefits per person. The most common amount is $1,000 per year, although some plans may pay as much as $1,500-2,000. But employers looking for mor affordable dental can choose to cover as little as $500, $750 or $800.
Reducing the plan maximum will save 5-15%, depending on the level chosen. It's still a full coverage dental plan, but there's a limit on the benefits for any one person in a calendar year.
Note that it's less disruptive to choose a low level before a plan is installed than it is to reduce it afterwards. Also note that only about 5% of employees ever hit the $1,000 annual maximum in a given year.
Deductibles vary. A higher deductible lowers premiums. The difference in price between a $25-deductible plan and a $50 one is 5-7%. Once again, while maintaing full coverage, there are cost control factors.
Deductibles are usually, but not always, waived for preventive services such as semi-annual cleanings. Imposing the deductible on preventive care does little to create an afforable dental plan, and it may discourage good dental preventive habits. So waiving the deductible may actually help lower overall costs by treating dental problems when they are small.
Types of Procedures and Benefit Levels
- Preventive procedures. These are usually paid at 100%, so that a preventive care visit to the dentist is effectively free. Preventive procedures usually include routine exams, cleanings, X-rays, fluoride treatments for kids, and space maintainers.
- Minor Restorative procedures. Commonly paid at 80% after the plan deductible, these procedures have traditionally included fillings, extractions, root canals, and gum surgery.
- Major Restorative procedures. Also subject to the deductible, these are most commonly paid at 50%. They have historically included crowns, bridges and dentures.
- Orthodontics. To be included the plan must cover Major Restorative procedures. Orthodontics coverage for adults is now also available.
Businesses don't need to cover every procedure. Nor does a plan need to pay the "traditional" benefit percentages. By making the right choices, you can help control premium rates without unduly burdening employees.
Strategies for Reducing Costs
Each of the strategies below is discussed elsewhere on this site in much greater detail. The strategies below are suggested primarily as an overview.
Limit Types of Coverage.
The most common way employers create affordable dental plans is to limit the kinds of procedures covered by the plan. For example, older employees generally incur the most Major Restorative procedures. If you have a younger workforce, you can exclude coverage for Major Restorative procedures and save 25-35%.
Of course, if you eliminate coverage types entirely, it's no longe a "full coverage plan," but if it becomes a more affordable dental plan for more employees, that may offset the impact of the reduced coverage.
Allocate Procedures Strategically.
Employers can also rearrange the benefit provisions. For example, it's common today to cover gum surgery and root canals as Major Restorative procedures (paid at 50%) rather than as Minor Restorative procedures paid at 80%. Therefore, those claims are still covered, but only those employees incurring the cost will pay a penalty, not the entire group.
Another common example is to pay for children's space maintainers as a Minor Restorative procedure (80% after a deductible) rather than as a Preventive procedure (100%, no deductible).
Limiting the frequency of coverage of certain procedures also leads to a more affordable dental plan. Many employers now
- Limit cleanings to once in 12 months, not twice.
- Limit the number of bitewing X-rays/year.
- Limit full-mouth X-rays to every 5th year rather than every third.
- Limit sealants to children and reduce their frequency.
- Limit crown replacement.
- Limit bridge replacement.
Select Lower Reasonable and Customary Limits
"Reasonable and Customary" refers to how a carrier determines its maximum payment for a given procedure. If for example, a carrier says it "pays to the 90th percentile level," the carrier is saying that its maximum allowable payment will equal or exceed what 90% of local dentists charge for that procedure.
Those levels used to be part of the contract, but now employers often can choose among levels. By choosing the 80th percentile, or the 70th (or even the 50th!) an employer lowers the costs of the plan (and thus the premium).
Employees will be less satisfied because they'll pay more themselves, but everyone's premiums will be lower. And on the most common procedures (fillings, etc.) the difference between the 80th percentile and the 90th is only a couple of dollars, so employee pain is limited.
The employer can even choose a "Schedule of Benefits" plan. In this plan, a fixed, predetermined amount is allowed for each dental procedure. The employee knows, going into her appointment, exactly what amount the plan will pay, with the balance her responsibility. So-called "schedule" plans pay something toward every procedure, so the employer doesn't arbitrarily penalize any particular procedure such as root canals or periodontic work.
Another important consideration is that a schedule plan effectively eliminates the impact of dental inflation because the amount payable by the plan remains fixed until the employer elects to change it.
Putting the Strategies to Work
How does the employer sort through the forest of options to determine the plan that works best for them?
Easy. That's our job. A good, knowledgeable, independent broker (we think we fit that description!) solicits quotes from several carriers, suggest alternative design options, and guides the employer to an affordable dental plan.
The idea is to -- step by step -- construct a dental plan that will fit your employees' needs and your budget.
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