Is the Tooth Fairy Getting Laid Off? (from Employee Benefit News)

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As voluntary dental gains ground, consumers may find themselves spending more to keep teeth than pay for lost ones.
By Lydell C. Bridgeford
February 1, 2011

The shift to health consumerism hasn't escaped dental benefits. And if health care costs continue to squeeze benefit budgets, then more employers might start turning to voluntary dental plans.

According to 2009 research by LIMRA, dental is the third most requested benefit after major medical insurance and retirement benefits.

There are a variety of options in the marketplace for voluntary dental insurance. Plan designs under voluntary dental insurance come in all shapes and sizes because dental benefits are flexible. Moreover, voluntary coverage can reflect the same coverage offered under an employer-paid dental insurance plan. "

"Since the market is not standardized for voluntary [dental] coverage, an employer should be able to find voluntary coverage that fits their needs," explains Evelyn F. Ireland, executive director of the National Association of Dental Plans. "However, there are basic requirements for voluntary coverage that vary by employer size."

For example, "participation of both a minimum percentage of employees and a minimum number of employees is generally required, although what that minimum is varies from carrier to carrier," she says. "Waiting periods may be required for some procedures covered under the dental policy - particularly for groups that have never had dental benefit."

When comparing funding of dental PPO benefits from 2009 to 2010, NADP found that the funding of benefits on a voluntary basis increased by 3%, from 14% to 17%. By contrast, 100% employer-paid funding dropped by 9%. The research also notes that the largest category where employees and employers share the costs increased by 7%.

Further, NADP's "2008 Purchaser Behavior Survey" suggests that employers were considering shifting funding for dental benefits - either changing their level of contribution (28%) or moving to voluntary coverage (15%).

Analysts, however, were unable to determine if the change in voluntary coverage resulted from existing groups changing their funding or by groups that are adding coverage starting at the voluntary end of the spectrum of funding, Ireland notes.

Turning a negative into a positive

Some see voluntary dental insurance as a great way to turn a negative into a positive, especially if employer contributions to dental benefits have been dwindling, leaving employees to pick up a fair amount of the tab. Rather than eliminating a traditional dental plan, some employers may want to convert the program to a voluntary feature.

"Many underwriting rules for employer-paid programs prevent the employer from contributing less than 50% of the coverage without adding multiple requirements and rate adjustments. When the employer says, 'I can only afford to contribute 40%,' that is when the underwriter will typically encourage the purchase of a voluntary dental product," says Dean C. Hatfield, senior vice president and national health practice leader at Sibson Consulting.

In the past, the main vehicle for voluntary dental would be a DHMO, which offered limited choices. However, "the evolution of a voluntary dental product has now evolved into something that is more PPO-based," says John Doyle, president of the dental division at Dearborn National, a group insurance carrier.

With minor plan adjustments, a voluntary dental benefit can offer employees the flexibility in selecting their preferred dentist and provides a price point that is of value.

According to Doyle, roughly 50% of the employer-market space doesn't offer dental insurance, which makes voluntary dental one of the fastest growing segments in the dental insurance market when it comes to employers without dental insurance.

"While cleanings may be affordable, it's the diagnostic tests and what is discovered during the cleaning that can be expensive. The cost of X-rays and needed treatments (e.g., fillings and crowns) can add up quickly and make dental insurance a very useful benefit for employees," says Ron Agypt, senior vice president of Aflac group broker and market development in the United States.

Perfect timing

"Switching to a voluntary dental plan is one way companies can manage rising health care costs, while continuing to offer employees options to protect and insure their dental health," Agypt adds. "As employers continue to shift benefits costs to their employees, voluntary dental insurance plans are expected to grow in popularity."

A recent Aflac online survey of 1,000 working Americans suggests some workers are poised for voluntary dental insurance.

Conducted in June 2010, the survey looks at which dental plans are most commonly offered by employers, how the plan pays out its benefits and how important dental benefits are when evaluating employer benefits packages. To participate, respondents had to be 25-54 years of age with an income of $30,000 or more.

One-third of respondents are not offered a dental plan at work, with 70% of them being 35 to 54 - prime years for having to cover dependents.

Also, while 77% prefer no coverage restrictions, only 12% have all their dental expenses covered in a group plan, and nearly half are responsible for an annual deductible or copayment.

Nearly two-thirds of respondents worry about affording procedures, and more than half of them have rationed care because of cost concerns.

More options, portability important

Still, 60% say it is important to have a dental plan that is portable if they leave an employer for any reason.

Fifty-eight percent of workers would prefer their employers offer more options for dental coverage. Only 12%, however, have dental plans through their employers that cover all dental expenses.

Based on these findings, employers considering voluntary dental would do well to determine the price point for the benefit, so that it's a successful offering. This means factoring in employees' take-home salary and their contributions to health insurance and the 401(k) plan.

Also, under a voluntary plan, employers will want to provide sufficient options and do as much as they can to ensure employees are able to continue visiting their own dentists.

Dental benefits enrollment drops

Dental benefits enrollment declined by 5.7% in 2009, according to the National Association of Dental Plans. It's the first drop in dental enrollment since 1994, the year NADP began tracking enrollment.

The "2010 Dental Benefits Enrollment Report," issued by NADP and Delta Dental Plans Association, revealed that 166 million Americans (54%) were covered by some form of dental benefit through group or individual plans in 2009.

The 5.7% dip reflects about 10 million fewer Americans with dental coverage, compared to 2008 figures. Still, enrollment from 2006 through 2008 increased in line with U.S. population growth, remaining steady at 57%, according to the research, which is based on data from 88 employers.

"While total enrollment significantly declined in 2009, the number of employer groups offering dental benefits remained consistent, compared to the previous year, based on data submitted for the report and other industry studies by LIMRA and NADP," says Evelyn F. Ireland, executive director of NADP.

The recession and a stalled economy contributed, in part, to decreased enrollment. "The reduction in subscribers in some employer groups in 2009 most likely reflects family financial constraints and layoffs, as Delta Dental's data indicates that dental benefits remain an important part of employer benefits programs, despite a challenging economy," says Kim Volk, president and CEO of DDPA.

Top dental trends

69%

The trend toward dental PPO products continues among commercial products, with 69% of all commercial dental benefits reported as DPPO. Indemnity and dental HMO products continue to decline in market share, while discount products maintained market share.

99%

Dental benefit premiums and fees are paid at least in part by most enrollees. While discount plans report 99% of all enrollees paying at least part of the fee, insured products range from 85% of DPPO enrollees paying a portion of premium to 61% of dental indemnity enrollees paying for a portion of premium.

1%

Only 1% of the population with dental insurance products, i.e. DHMO, DPPO or dental indemnity, has its benefits through individual policies. Roughly 9% of dental discount products are sold as individual policies.Source: National Association of Dental Plans and Delta Dental