Why in-house membership plans could replace ‘insurance’

Dental "insurance" isn't really insurance, and it is exerting a negative influence on patient care and practice sustainability.

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Every year dental benefit providers are decreasing the amounts paid to dental practices. With these decreasing reimbursements and higher patient co-pays, many practices are looking at alternatives to dental benefit plans. One option is the in-house membership plan. This article will review some of the basics of in-house plans and what the hygienist should know.

Are dental benefit plans insurance plans?

Many patients, not to mention team members, believe that dental benefit plans are dental insurance. Nothing could be further from the truth! Insurance is defined by Dictionary.com as “the act, system or business of insuring property, life, one’s person etc., against loss or harm arising in specific contingencies such as fire, accident, death, disablement, or the like, in consideration of a payment proportionate to the risk involved.”1

Given this definition, dental insurance is not “insurance” since it is not providing assurance from loss. Rather, it is a benefit that an employer provides the employee and their family, similar to paid time off. Let’s review some of dental benefits’ history.

History of dental benefit plans

It wasn’t until the 1950s that dental insurance came into existence. From the mid-1800s, medical insurance existed, but it wasn’t until 1954 that the International Longshoremen’s and Warehousemen’s Union and the Pacific Maritime Association bargained to obtain dental “insurance” as an employment benefit. This bargaining agreement allowed children of union members to obtain dental coverage along with a payment of $750,000 to the dental associations of California, Washington, and Oregon. With the money, dental benefit organizations were formed: the Washington Dental Service in 1954 and the California Dental Association in 1955.2 By 1963, almost 7,500 dentists had joined the California Dental Association with over 235,000 people covered.

As word spread across the country about the organization and its services, the American Dental Association in 1966 recommended a national agency to coordinate benefits across state lines—Delta Dental Plans Association, under the National Association of Dental Plans. During the 1970s, employer-based plans grew, and the maximum annual benefit per year was capped at $1,000. Most plans were administered by Delta Dental in the 1970s. Yet, in the 1980s, large dental insurance organizations were formed, otherwise known as PPOs (preferred provider organization). A PPO was designed as a contracted network of dentists who agree to accept a reduced fee for treating the insured. Coverage extends to out-of-network dentists but the patient pays the difference between network and out-of-network fees.3

As the success of PPOs grew, the Dental Health Maintenance Organization (DHMO) was developed. DHMOs require the insured to see a participating provider at a reduced fee with no maximums or deductibles. According to the enrollment statistics of the National Association of Dental Plans in 2017, approximately 77% of Americans have dental insurance, yet many patients don’t fully use their entitled benefits.2 With the advent of the Affordable Care Act, this includes 90% of children since health plans offer dental coverage up to age 18. Delta Dental plans alone cover 78 million Americans in all 50 states, Puerto Rico, and the US Virgin Islands.2

While inflation has rolled along, dental benefit coverage is still at the 1970s level! If coverages had kept up with the rates of inflation, average annual maximums would be close to $10,000!3 Additionally, dental benefit providers are requiring dentists to write off more and more of the differences between their benefits and the actual cost of the services while requiring patients to pay more out of pocket with no out-of-pocket maximum that benefits medicine. As one can see, dental insurance is not insurance at all!

In-house dental membership plans

So, with all of that information and the costs and overhead of maintaining the dental practice of 2019, many practitioners are looking at ways to increase revenue, assist patients in obtaining the necessary dental care they need, and grow their patient base. Thus, the advent of the in-house dental membership programs. Patients are familiar with loyalty or subscription programs from a variety of everyday sources. In-house membership plans work in much the same way as these loyalty/subscription programs for those patients who do not have insurance or for whom dental insurance is too expensive or not worth the investment.

In-house dental programs can only be offered to those patients who do not participate in their employers’ dental benefit plans. Many practices are demonstrating to patients the cost of the in-house plan is often less than what they would be paying if they opted for the employer plan with deductibles, maximums, and co-payments.

In a recent insurance focus group, Teresa Duncan, a leading national dental consultant, polled participants regarding their use of in-house membership plans. Comments included: “Telling patients that their $200 visit was included in their plan today has a bigger impact than saying everything was covered today”; “We expect our baby boomer patients who will be retiring to be interested so they won’t disappear from the practice thinking that they can’t afford treatment or that Medicare HMO will cover it; yet they don’t realize how far from the truth that is”; or “Our in-house plan is set at a very low yearly rate and offers prophies free two times a year. Since it is only a bit more than the prophy UCR, it makes sense to purchase it, obtain another prophy free, and receive 25% discount on all other services” (Teresa Duncan, email communication, February 2019).

How do in-house plans work?

In-house membership plans offer patients affordable care while improving the productivity and profitability of the practice. The basis of the in-house membership plan is the fee the patient pays, either for an individual or family. This fee can be an annual or monthly subscription paid directly to the practice or to an outside vendor. This subscription allows for a number of “free” prophylaxes, evaluations, radiographs, and a discount on all other services. Practices entitle patients to be subscribers and receive services for a consecutive 12-month period. The practice can determine the actual number of prophy appointments and other services to discount. Some plans even offer discounts to referring specialists. This provides the patient with a prevention-oriented program, yet they can decide what they choose to subscribe to—the more services discounted, the higher the subscription rate. By offering in-house memberships, the practice can build a more loyal patient base that is fee-for-service, thereby increasing revenue while providing optimum patient care without dental benefit plan provider interference.

Other considerations

Although in-house membership plans are a definite advantage in today’s dental environment, there are a number of issues that need to be addressed surrounding their use. Practices interested in providing their patients with an in-house program should speak with an attorney regarding any state-specific rules or regulations governing these programs since some states may consider these a type of “insurance” and, therefore, the practice would need to be registered as an insurance company. Team members need to take on the additional duties of maintaining the patient subscription base and determining how to retain patients in the program while marketing to new patients. The practice has to determine the actual cost of the program for patients; setting it too high often negates the benefits, while if set too low, the practice loses money as if it were insurance based. With all of these considerations, some practices opt for the use of outside vendors to manage their in-house programs.

An outside vendor serves as an SAAS (software as a service). There are a number of vendors in the market that can help with creation, implementation, management, marketing, and compliance of in-house plans. These vendors can subtract their fee from the actual in-house plan fee per patient or can charge a flat practice licensing fee. The number of patients who are enrolled in the in-house plan will often determine the best option. For example, if the practice is only beginning a program, the fee per patient may be the better option, while an established practice with a high number of patients enrolled may opt for the flat subscription fee. These vendors also provide ongoing marketing and retention programs for patients while offering a custom plan for the practice. Any marketing initiative needs to provide the practice information on the return on investment as well as the improvement the practice sees in revenue and profitability while ensuring compliance with all state rules and regulations.

Conclusion

As hygienists, we are prevention oriented and often are not involved in the financial discussions with the patient. Our patients look to us to determine the best care but often decline treatment because “my insurance doesn’t cover it.” When a practice offers an in-house membership program, the stigma of insurance not covering is reduced and the patient can afford the care they need. In this way, the patient and the practice can benefit.

References

  1. Insurance [definition]. Dictionary.com. https://www.dictionary.com/browse/insurance. Accessed March 5, 2019.
  2.  History of oral health: Dental insurance. Delta Dental website. https://www.deltadental.com/grinmag/us/en/ddins/2018/winter/history-of-dental-insurance.html. Accessed March 5, 2019.
  3. The short and fascinating history of dental insurance. Greenspoint Dental website. https://greenspointdental.com/short-history-dental-insurance/. Accessed March 5, 2019.


Ann-Marie DePalma, MEd, RDH, CDA, FAADH, FADIA, is a technology advisor for Patterson Dental, a writer for RDH magazine, and an author in dental hygiene textbooks. She is the 2017 MCPHS Esther Wilkins Distinguished Alumni recipient. She is a fellow of the Association of Dental Implant Auxiliaries and American Academy of Dental Hygiene, a continuous member of the American Dental Hygienists’ Association, and an active member of the Massachusetts Dental Hygiene Association.