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PPACA fee could elevate dental ASO plan value

By Bruce Shutan

Brokers and advisers are huddling with their employer clients to brace for the changes that will be brought on by the Patient Protection and Affordable Care Act (PPACA). However, many may not be aware of the impact this will have on dental benefits. Brokers educated on the issue can distinguish themselves by offering the right solutions for their clients.

As part of the act, a fee will be charged to all entities providing health insurance to help subsidize care for nearly 30 million uninsured Americans who are expected to be covered.

With an estimated $8 billion industry-wide bill due in 2014, divided by the total premium of fully insured plans, every fully-insured plan will be expected to pay the federal government about 1.5% of health premiums, according to Tom McInteer, second vice president in the group dental division for The Guardian Life Insurance Company of America. He says that figure could double in later years as the assessment increases.

But many may not realize that dental and vision plans in addition to medical plans will be assessed with this fee. However, McInteer explains that the fee does not apply to employers that offer self-funded benefits. Therefore, a dental administrative services only (ASO) program may be just what the doctor Ė or dentist Ė ordered to help maintain the affordability of employer-provided dental benefits.

ASO plans, which have long been a solution for employers looking to offer comprehensive, yet more affordable dental coverage, will become an even more attractive alternative.

“The potential for the impact of this fee to be included in the overall pricing of fully insured plans will give additional incentive for employers to self-insure their dental plan in order to manage costs while providing the right dental benefits,” McInteer states. “It’s more important than ever for brokers and employers to understand how they could benefit from an ASO arrangement and what to look for when selecting a carrier.”

The ASO advantage

ASOs are an excellent vehicle for delivering dental benefits, whose claims are fairly predictable and generally not catastrophic. This self-insured arrangement enables plan sponsors to eliminate the premium taxes and risk charges associated with fully insured dental, while also offering quality benefits.

One key advantage of an ASO arrangement is that thereís currently no state premium tax, which is equivalent to between 2% and 3% of the premium. McInteer believes the PPACA fee, if included as an overall health company expense, could double the incentive for employers to self-fund their dental benefits with an ASO.

When selecting a carrier for an ASO dental plan, itís important for an employer to feel confident that the plan will help them control costs, since the risk is on them. One of the most important ways to do this is with a strong network of dentists offering substantial discounts. Guardian offers a broad provider network featuring more than 74,000 dentists in more than 161,000 locations nationwide with discounts averaging 30%. Providing more access to discounted care can potentially result in claims savings for both the employee and the employer.

Another key consideration for the plan sponsor is the extent to which claims are processed quickly and efficiently. In the case of Guardian, the average claims turnaround time is 2.5 days, while sophisticated dental review logic detects unbundling, upcoding and incorrectly submitted CDT codes resulting in a 99% accuracy rate.

A new approach to ASO

Where Guardian really distinguishes itself apart from others in this market is by offering a creative yet simple alternative for producers who may not be entirely comfortable recommending an ASO program for groups that are reluctant to take on full risk.

An innovative hybrid option combines the best features of a fully insured product, including 105% stop loss coverage, with a standard ASO plan. Plan sponsors are billed for this maximum liability each month and if claims exceed that amount, then Guardian will pay the difference, adding a fixed-cost component to help budget for dental expenses.

McInteer considers the 105% stop loss coverage to be a rather significant feature that’s rarely offered in the marketplace. “We really believe the future of dental is in ASO,” he says. While most dental carriers will offer plans “as an ASO accommodation” when deemed necessary, he explains that Guardian is actively trying to promote the concept as a smart choice for employers that want to offer dental coverage.

“When I get in front of groups of brokers, they’re not even aware of the fee on health insurers and how that could impact the cost comparison between fully insured and ASO offerings,” he reports. One possible reason is that health insurance trumps dental coverage in terms of employee benefit priorities. “Dental is not getting a lot of attention,” he adds. By understanding the implications of PPACA and how ASO dental plans can really help employers save, brokers can distinguish themselves and meet their client needs.

Learn more about another important impact that health care reform may have on dental benefits. Visit NADPís Web site: www.keepourcoverage.org

About the author
Bruce Shutan, former managing editor of Employee Benefit News, is a freelance writer based in Los Angeles.


The Guardian Life Insurance
Company of America

7 Hanover Square
New York, NY 10004

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