Subtle yet important trends are reshaping dental benefit plan designs as employers continue to search for ways to keep costs in check while making minimal impact on what they offer to their employees.
While few employers are dropping dental coverage outright (in fact the number of employers offering them has grown), they are instead resorting to some new strategies, including:
• Higher deductibles,
• Lower plan coinsurance,
• Adoption of preferred provider organizations (PPOs), and
• Switching certain procedures from one category to another.
While new products have emerged in the health insurance arena, there have not been the same developments in dental insurance benefits because cost increases have been minimal.
While medical cost inflation has been high (albeit slower in the past four years than previously), employers have been shifting more costs of medical coverage and health care to employees. But mostly they’ve left their dental plans untouched.
That said, there are some trends affecting dental benefit plan design:
• Higher deductibles. While many employers continue to offer dental plans with no deductibles, an increasing number now require a commitment from employees, and the level of that deductible has been slowly but steadily rising.
In the past five years, the percentage of employers offering plans with a $0-$25 deductible has gone from 63% to 55%. That decline is expected to continue. Generally, however, most plans continue to offer diagnostic and preventive services with no deductible.
• PPO plan designs. Some employers have turned to preferred provider organizations to take advantage of the discounts they offer in return for a limited network of doctors. But employees may not like this option because most PPOs are small and their networks may not include the dentists they have been seeing.
• More self-insured groups. An increasing number of larger groups, generally those with 100 or more employees, find they can save money by self-insuring their group. But they may need to contract with a third-party administrator to handle the claims.
• Higher employee contributions. Many companies are bumping up the share of costs that employees pay for dental premiums. While many employers foot the premium bill 100%, some are starting to have their employees pick up a percentage. And some employers that are first starting to consider dental coverage will start by making it a voluntary plan, in which the employee picks up the premium tab.
• Many companies that are introducing dental benefits for the first time are opting for “voluntary” plans, in which the employees pay the full cost of the premium.
What can you do?
If you are considering changes to your dental plan, to ensure minimal impact on your employees you may want to consider first (in this order):
1. Raising the deductible, but not increasing the employee’s contribution. Remember that dental benefit plan costs are utilization driven, and utilization rates for the most part are user-discretionary. Raising deductibles discourages utilization. Lowering the employer contribution, on the other hand, tends to reduce participation in the plan but increases utilization, ultimately increasing the cost per covered person.
2. Comparing your plan to others. Talk to some of your peers in the business community, or to us, to find out what other employers are offering in their dental plans. In this case, remember why you are offering dental in the first place: to attract and retain talent. Try to focus on a plan that is similar to what other businesses are offering.
3. Talking to us. Don’t be shy about asking us for ideas about how you can improve your plan to better achieve your goals. We aren’t going to pitch you on the most expensive product, but rather give you advice on identifying the product arrangement that best suits your company at this time.