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Looking for a lower cost alternative to your group dental plan?  Consider this example of how a Consumer Directed, Employer Sponsored Group Dental Plan works.

In 2000 business was booming for the American Manufacturing Company of Ohio and John, the owner, decided to add dental insurance to his employee benefits program.  The plan he selected covered preventive care (2 cleanings and exams and I set of x-rays per year) at 100% and, after a $50 deductible, covered basic services at 80% and major services at 50%.  The premiums were $25/month for an employee and $60/month for a family.  John said he would pay the single rate for everybody and those employees who wanted to add family members would pay the difference.  The plan was extremely popular with his 100 employees and, with annual increases of only 5%, John kept paying the single rate.  With the economic downturn over the past few years, however, times have been tough for the ABC Manufacturing company so last year, in 2010 when the single rate for the dental plan hit $40, John surveyed his employees to see if they would be willing to contribute $15/month each to the plan which would bring the company cost back down to $25/employee.   Only half of the employees said they would be willing to do that so, in order to keep the plan, John had to continue paying the $40 because the dental insurance company required a minimum of 75% employee participation.   The premium for family employees had also increased over the years to $100/month so even with John’s $40 contribution, the cost for an employee to have family coverage was $60/month and several employees had dropped their families out of the plan.  John recently received his 2011 renewal rates, an 8% increase taking the single rate to $43 and the family rate to $108.  The company can no longer afford the premiums and John seriously faces the possibility of having to cancel the dental insurance.  Rather that give up on an important employee benefit, John instead elected to switch from dental insurance to a consumer directed, employer sponsored dental plan.  

First, he selected a dental network to contract with.  He chose the Careington Plan because they had a huge network of over 64,000 dentists (over 40% of all the dentists in America) and, as such, commanded discounts in the range of 50% to over 70%.  He also liked the fact that they gave specific amounts (fee schedule) that an employee would pay for each procedure.  John’s cost was $7/month/single employee to “rent” the network and he then set an allowance for each employee of $13/month ($156/year) that an employee could draw on to pay for the out of pocket expenses because that amount provided more than enough to pay for two visits per year.  Here is the breakdown of costs the employee would pay, ADA codes in parenthesis:
 
    Visit#1:  Comprehensive exam (0150) $18, adult cleaning (1110) $29, full series x-rays (0210) $40
    Visit#2:  Periodic exam (0120) $14, adult cleaning (1110) $29
    Total annual cost:  $130

Each employee then had an additional $26/year ($156 allowance minus $130) that would be available if additional dental work were needed.

Originally willing to spend $25/month per employee and the new plan only costing him $20/month ($7 premium plus $13 allowance) John decided to further help out the employees that had families.  He chose to pay the $16/month family network costs and give families a $14/month allowance, meaning that employees with families would cost the company $30/month.  This pretty much averaged out to the affordable $25/employee in his budget.  Employees with families had previously been contributing $60/month, or $720/year for a plan that covered two visits in full.  There would be no payroll deduction for premiums with the new plan, but families would have out of pocket costs.  As shown above, the annual cost for an adult with the Careington plan is $130.  A child’s cleaning with Careington is only $21, so the annual cost for a child is $114/year.  A family of 2 adults and 2 children, then, would have annual costs of $488.  The company is contributing $168/year ($14/month), so the net cost to a family would be $320/year, a savings of $400 to the employee over the old dental insurance plan.

John also wanted to make sure that dental procedures beyond cleanings were also going to be affordable.  He first looked at a basic service, a simple filling, ADA Code 2140.  The Careington fee schedule cost was $40, a discount of about 70%.  The dental insurance plan would have paid 80% after a $50 deductible, so John felt this was pretty equitable. 

The group dental insurance would have paid 50% for a root canal.  For ADA Code 3310, anterior root canal, a Careington member pays $272, a discount of about 60%.

A Careington member pays $428 for ADA 2750, porcelain fused to metal crown, a discount of over 50%.  The dental insurance would have paid 50% for the cost of a crown.

The only potential downside John could see with switching to the Careington plan was that the employees are required to use the network dentists.  Some employees would certainly complain.  The equitable solution was to present it to his employees as a Consumer Driven Plan.  For anyone who chose to opt out of the Careington plan the American Manufacturing Company would provide each single employee with $240/year ($20/month), $360/year ($30/month) for each employee with a family, to draw on against any dental expenses they incurred at any dentist.  Employees had complete freedom to go to a non-network dentist and pay retail or go to a plan dentist and take advantage of the buying power of the network.  It was their choice as consumers of services versus purchasers of insurance.

Contact Ronald Haines at 216.539.0589 or send email to ronald@dentalplanguy.com