Employers Continue Searching for Ways to Contain Dental Insurance Costs

Posted by on Feb 27, 2013 in Employee Benefit Program, Health | 0 comments

Employers Continue Searching for Ways to Contain Dental Insurance Costs

 

Slightly more than half (54%) of Americans received some form of dental insurance coverage in 2002, according to a recent report from the National Association of Dental Plans (NADP).  Cost increases for 2002 and 2003 once again outpaced inflation.  Expect this trend to continue as dental costs are projected to rise another 5% in 2004, according to HR consulting firm Towers Perrin.  In an effort to control costs, employers have continued to shift away from traditional indemnity and HMO dental plans as they search for more affordable ways to offer this desirable employee benefit.

The main beneficiary of the shift away from traditional indemnity and HMO plans has been preferred provider organizations (PPOs), according to the NADP report.  Nevertheless, traditional indemnity dental plans still have the largest market share at 39%, covering approximately 54 million members.  But indemnity plan enrollment has fallen steadily from 78 million in 1996 to 60 million in 2000 and it dropped another 8% in 2002.  At the same time, dental HMO participants declined to 23.4 million, representing 17% of the market.

Market share for dental PPOs has expanded to 35%, adding 4.2 million new members in 2002. Dental PPO enrollment totaled 64.9 million in 2002.  For 2003, coverage costs for dental PPOs jumped an average of 7.7%, while the increase for indemnity plans was 7.6%, according to Aon Consulting. Dental HMO cost increases averaged 5.1%, Aon reports.

Employees are paying a slightly higher share of the premium for dental benefits according to the NADP analysis. The average employer’s share dropped from 62% in 2000 to 58% of premium cost in 2002.  Employee premium costs vary widely from plan to plan, with participants paying an average of 61% of premium costs for indemnity dental coverage, compared to 35% of premium cost for HMO coverage, and 27% of premium for PPO plans.

A newer approach to cost containment is a model for dental PPOs that involves selectively contracting with dentists who have a record of steering clear of unnecessary and overly expensive procedures.  Some believe there is a great deal of over treatment and unnecessary procedures by dentists, such as the overuse of costly crowns when more conservative, less expensive treatment would be just as effective.  These PPOs seek to contract with dentists who strive to provide quality care at a reasonable cost.

Another growing area is discount dental plans, which added about 600,000 new members in 2002, according to the NADP report.  These plans don’t pay for treatment or services, don’t provide benefits, and aren’t considered to be insurance.  What they do offer in return for a small monthly fee is access to networks of service providers with set fee schedules.  Much of the growth in this area comes from small employers offering voluntary and discount plans to employees.