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Stable costs may distract employers from small but significant changes in dental benefits plans.
In today’s environment, where double-digit increases in health care costs seem to have transfixed employers, dental benefits—with their relatively low and stable costs—probably aren’t attracting much attention. But there are noteworthy developments taking place below the surface.
Employers certainly can be forgiven if they’ve paid less attention to dental benefits than their ballooning health care plans. Unlike health coverage, dental coverage is relatively inexpensive, costing an average of $650 per year per covered employee—and costs can be even lower for dental plans offered through health maintenance organizations (HMOs) and preferred provider organizations (PPOs), according to estimates from PricewaterhouseCoopers LLC in New York.
“An employer paying $6,000 per employee for medical coverage tends to be very grateful for the dental benefit, which represents a high-visibility, low-cost offering that employees like and value,” says Barry Barnett, principal of the Human Resources Solutions Group at PricewaterhouseCoopers.
Moreover, dental care is not experiencing the double-digit inflation seen in the medical and prescription drug arenas. According to 2004 data from The Segal Co., an independent, New York-based consulting and actuarial firm, cost increases for traditional fee-for-service, PPO and HMO dental plans have held steady for the past five years and are expected to be roughly the same in the coming year: 7.4 percent, 6.8 percent and 5.2 percent respectively.
Costs have been held relatively stable by competition among the huge, nationwide networks of dentists put together by the big players—Aetna Inc. of Hartford, Conn.; Delta Dental Plans Association of Oakbrook, Ill.; MetLife Inc. of New York; and CIGNA Corp. of Philadelphia.
Another factor holding down costs is improved dental health: Levels of tooth decay and gum disease in children and adults have declined because of advances in oral health generally, through fluoridation, more and better oral hygiene products, and heightened awareness and education. Cases of dental caries (cavities) in the permanent teeth of school-age children have been declining since the early 1970s, according to data from the Healthy People 2010 project of the U.S. Department of Health and Human Services. Fewer adults are having teeth extracted because of dental decay or periodontal disease, and the percentage of people who have lost all of their natural teeth has been declining steadily for 50 years.
Yet even amidst this remarkable stability, some minor but important changes are taking place in the dental benefits arena.
Case in point: Providers say employers are demanding more-efficient plan administration and better service to employees. Some providers are responding. For example, some of the larger carriers now offer online information about claim status and costs of procedures, and they are expanding cost-effective options for smaller companies and for employers with lower-paid workforces.
Choosing a Dental Plan
For the most part, employers seem satisfied with the state of their dental coverage, and there tends to be very little switching of carriers and products—in part because dental plan costs do not differ substantially among insurers.
However, there are several other pivotal characteristics benefits specialists should compare, say experts, including:
“Our chief selling point to employers is the size and scope of our network,” says Jeff Album, director of public affairs for the nonprofit Delta Dental of California, Pennsylvania and New York, the largest dental benefits administrator in the United States and a member of the national Delta Dental Plans Association. “In our markets, we have signed up three out of four dentists; in California, it is 92 percent.” Other big carriers can boast large participation numbers as well because providers are typically enrolled in multiple networks.
For example, small price-conscious employers can provide an “access plan” that offers simple discount cards for dental care and costs only $5 to $8 per month per employee. The typical discount is 30 percent off the standard fee for various in-network dental services, such as fillings, braces, exams and routine cleanings.
“One encouraging development on the access plan side is that these plans are no longer just the territory of the smaller niche dental companies. The recent movement of two of the largest carriers—Aetna and CIGNA—into this market is a positive development for those looking for a low-cost option,” says Cathye Smithwick, senior associate for Mercer Human Resource Consulting in San Jose, Calif., and a former dental hygienist. “They have built-in provider networks for these products,” which are marketed to small employers, service companies with high turnover and companies with a large number of low-wage hourly workers.
Although dental plans are not offering many innovations in coverage these days, Album says, “Our customers’ expectations about service are increasing. They want us to minimize any hassles that might crop up and increase the ease of plan administration for our subscribers.” He adds that since employers aren’t going to save significantly by changing their dental plan design, “service becomes the Holy Grail.”
Benefits administrators should choose “a plan that allows them to easily grasp all the limitations and exclusions and how they are administered,” says Album. “Then they can communicate this to employees—for example, suggesting that they obtain pre-authorization for procedures so there are no surprises.” This could circumvent a common source of employee complaints: discovery that a portion of a claim is not paid because the fee for the particular service exceeds what the plan allows as “reasonable and customary,” forcing the worker to pay the difference.
In another nod to better service, many large carriers offer employees web access to information about their dental coverage.
Also, carriers often fine-tune their flagship dental HMOs (DHMOs) and dental PPOs (DPPOs) to benefit employees. One such variation is the “swing plan,” which allows employees to switch from a DHMO into a DPPO any month of the year, without having to wait for the annual open enrollment period.
Provider numbers, diversity and quality. Ask about size and quality of the provider pool. How many offer weekend hours? What technologies and new materials are available? Does it include specialty practices such as pediatric dentistry?
Employers who are offering a dental plan for the first time should not gauge employee use and return on investment in the first couple of years, Barnett cautions. “The first year you offer it, everyone will use it right away. Many will not have seen a dentist in years, so there will be a lot of checkups and treatments initially, but this spike will find a normal level within two or three years.” He notes that “carriers are pretty sophisticated about underwriting, so ask for a prorated or guaranteed rate for the first years” to help control the costs of high initial utilization.
DHMO and DPPO Plans Lead Market
After selecting a carrier, an employer can choose which of the carrier’s dental plans will best serve its employees. DHMOs and DPPOs are the most popular options for medium to large companies.
Papa John’s International Inc. of Louisville, Ky., gives employees a choice of joining CIGNA’s DHMO or DPPO. The DHMO is the lowest-cost option. It requires employees to select providers within a network, and they pay no deductibles or co-pays. The DPPO lets employees go out of network as they prefer, but it does include deductibles and co-pays, says Annette Calhoun, director of benefits for the pizza restaurant chain.
About 80 percent of the company’s 2,400 eligible employees opt for dental benefits, at an average annual cost to the company of less than $200 per covered individual, Calhoun estimates.
DHMOs and DPPOs tend to separate dental services into three areas:
DPPO plans usually cover 100 percent of preventive care costs, 80 percent of basic restorative costs after a deductible and 50 percent of major restorative costs after an annual deductible, usually in the range of $1,000 to $2,000. DHMOs follow a similar approach, but without the deductible.
Orthodontics is often offered as a fourth area of coverage. DPPO plans usually cover 50 percent of cost up to a lifetime maximum limit, typically in the range of $1,000 to $2,000, to mirror DPPO annual deductible maximums. “True, the cost of a full course of orthodontics is high—$4,500 or so—relative to the lifetime maximum,” says Smithwick, “but this is a highly elective and expensive procedure. I consider it very generous of any employer willing to pay $1,000 to $2,000 per child or per family member for this elective procedure.”
Sharing Costs With Employees
There is a growing trend of having employees pick up at least part of the tab for dental coverage. So-called “voluntary plans,” which many of the major carriers offer, allow cost-conscious employers to offer access to any dental plan they might choose—HMO, PPO or traditional fee-for-service plans—by passing some or all of the premium costs to the employee.
“Voluntary plans are those where the employee makes more than half of the contribution, and they are actuarially rated differently,” Smithwick explains. That’s because these plans run the risk of spiking costs as a result of human nature: Employees will naturally be frugal, so they tend to enroll only when they know they need costly dental work, and then they will drop out after a year or two when their teeth are healthy again, “causing a cost death spiral,” she says. “Premiums then start to rise, and when they reach a certain level, employees won’t enroll.”
These plans work best when costs are kept low and predictable enough to attract members, so many come with restrictions such as minimum employee enrollment requirements—often 20 percent to 25 percent—waiting periods for new employees, and lock-in/lock-out clauses that require members to commit to a period of two or more years. Once they drop out, they may not be allowed to re-enroll.
A well-designed voluntary plan structured with the right limits can attract plenty of enrollees and assure stable costs. The employer can pay almost nothing if the company elects to pass the entire premium cost to employees.
Martha Frase-Blunt is a freelance writer based in Shepherdstown, W.Va.
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