Employers and brokers should step back and look at the benefit products that are being used and ask: “If we were designing these plans in 2012, what would they look like?” Today, we use dental plans designed over 50 years ago, and vision plans designed over 25 years ago. Both of these predate HRAs, HSAs, and FSAs. All plans from all insurers are almost identical:
- Same design
- Mostly insured
- Multiple rules on frequency, procedures, age, and limits
- PPO networks
Where is the creativity, flexibility, and differentiation?
There are options for both dental and vision plans that are simpler, easier to understand, and more cost efficient. Current plans are “procedure based.” Benefits are tied to procedure codes with different ones paid at different percentages, frequency or age. And, there are many procedures that are excluded. Why? Because claim dollars are limited by limiting care and that reduces premiums.
In 1993, as a benefit broker, I learned about an alternative dental plan called Direct Reimbursement for dental and soon found out that it worked just as well for vision plans. At the time, I thought it was too simple to work well. But, I was wrong. Our clients liked it and began to use it. It worked wonderfully well and today most of the clients who implemented plans in the 1990s still use the plans.
This is significant, as insurers turn over their dental plans an average of every 3.5 years. Insurers simply swap policyholders. This is disruptive to the patients, the employer, the broker, and the dentist/eye care doctors. Yet, it is a cycle that has gone on for 50 years.
What is the alternative? Use a “dollar based” plan that has only four rules to determine the benefit; not the 65 rules found in all other dental plans.
The four rules:
- Annual maximum — per individual or per family (as in an FSA, HRA, or HSA)
- Co-insurance — the same for every procedure
- Cosmetic care — the only exclusion
- Reduced benefits for late enrollees
By adjusting the annual maximum and co-insurance, any cost objective can be achieved for an employer. Because of the lack of exclusions and limitations, the patient and dentist can make all decisions on the procedures for the best long-term outcomes.
If you, as a benefits adviser, want to give the best possible advice, consider a “dollar based” dental or vision care plan.
Plan design examples:
The employer selects the individual annual maximum; we recommend $1,500 to $2,500. Or, they select a family maximum of $3,000 to $5,000 where any one person has access to the entire amount. Just like an FSA, HRA or HSA.
The co-insurance can be a flat percent of any procedure such as 60%, 70% or 75%.
Or the co-insurance can be tiered, such as, 100% of the first $250 of any dental expense, then 50% of the balance.
Simple, easy to use and fair!
Schultz, CLU is a principal in Simple LLC, a company that creates unique products for benefit brokers and their clients. He has 45 years of experience in employee benefits including his prior brokerage firm of 30 employees. He can be reached at email@example.com or 404-401-3040.
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