DENTAL INSURANCE AND ITS UNEASY RELATIONSHIP TO THE PRACTICE OF DENTISTRY

This is an opinion piece and not a fact checked reference source. The intention of this essay was to answer some of the commonly heard questions and misconceptions about dental insurances. An attempt has been made to answer some of the queries, address some of the confusion and probably provide a contextual reference while navigating the minefield of interaction between dental providers and patients and their insurance providers. The numbers and quantitative comparison figures used are only for the purpose of illustrating a point but at the same time have some basis in real life numbers.

In the delivery of medical/dental services to patients most do not realize that  the contractual obligations are between the doctor and the patient only. The insurance is a third party in this arrangement interjected only for the purpose of financial compensation. The insurance company is beholden to the patient as they are the subscriber, but their  relationship with the doctor’s office is only with regards to paying out the benefits.  However since the doctors’ offices historically have agreed to take on the responsibility of aiding the patient in the procuring the benefits from the insurance agencies, the patients have become exposed to only one part of the billing, that which they are responsible for. So when a crown procedure is done they may have a copay ranging from $200.00 to $500.00 ( based on a 80% or 50% estimation of a $ 1000.00 procedure and that is all they are made aware of.

The main misconception is in the concept of Dental Insurance. Dental insurances are really not insurance plans like the Medical insurances are. The first dead giveaway of this difference would have been at the sign up stage for the insurances. Compare the hoops you would have to jump through to be quoted for insurance in either the Life, Medical, House or Auto fields with that of Dental Insurance sign up. All of them start with taking stock of the current condition the person or the property is in and then figuring out the risk factors that will play a role in their lifespans. In other words you have to go through an evaluation process before a quote can even be written up.  The Dental insurance on the other hand does not require an evaluation. You will be quoted on the same benefit amount irrespective of how good your dental health is or how badly in need of work it is. In other words the “insurance” does not insure against anything. It merely provides a financial assistance to the subscriber with sometimes the added bonus of regulating the fee structure for the procedure. Classically the insurances makes available to the subscriber anything from $500.00 to $2000.00 per year for dental treatment and this money will paid based on a previously agreed and contracted formula. In other words not all procedures are paid at 100% rate. (So when patient insists that the office collect only what the insurances pay then they are in essence asking for the practice to give them an immediate discount of 20-50-100% range. In what model of business practice would that be a viable form of business? If practices agree to not collect co payment and still desire to remain in business, how can they not resort to some degree of unsavory business practices.)

Now for some interesting historical titbit about Dental Insurances: In the 1970s the annual insurances allowance for a patient was averaging $1000.00 – 1500.00. The cost of crowns was less than $200.00  Forty years later everything else in life has a new price tag, except the annual coverage limit which even today rarely exceeds a ‘generous’ $2000.00. In 1970 with the annual coverage of $1000.00 you could have gotten 5 crowns even if paid at the hundred percent levels. Today it might get you one if reimbursed at a hundred percent coverage rate.

A FREQUENT QUESTION THAT GETS ASKED: Do I need to get a Dental Insurance? Is it worth it?

If you are in good dental health, capable of being disciplined about dental maintenance and care then you probably will spend more on the dental premiums than for the services, unless you are getting the insurances courtesy of your employment and is very inexpensive.

If you are in extremely poor dental health and requiring a lot of work then understand that the dental insurance will cover at best only a small percentage of the actual cost. Hypothetically you had to restore the entire mouth with 10 crowns and that it would cost you about $10,000.00 and your insurance will probably kick in only $1000.00. It is like buying a car where in insurance helps to pay for the tax portion of the purchase. Is it worth paying high premiums to get an insurance that does not help much?

HMO vs non HMO insurances:

First some definitions:

HMO: Health care Maintenance Organisation

NON HMO Insurances: PPO: Preferred Provider Organisation or 

Indemnity: The traditional insurance

Simply put non HMO insurances pay for procedures on the basis of a fee schedule which may the UCR (Usual and Customary Rate) or a contracted discounted rate. There is however no guarantee that the Insurance will agree to the need for the procedure and would refuse to pay for it in which case the patient becomes responsible for the fee. 
Doctor gets paid only for services performed. Patients have the freedom to be seen at any office of their choosing. Some plans encourage patient to select from a panel of dentists who have signed a contract with Insurance companies in exchange for discounted fee schedules.

The HMO or Managed care plans provide the same care benefit at a heavily discounted rate; sometimes up to 50- 70 % discounts. However the insurance does not have to verify if a particular procedure is warranted. They leave that up to the doctors to determine. The caveat being that the work being recommended will not be financially as remunerative to the doctor as in the traditional system and therefore the onus is on the doctors  to be willing to do the same work for less. This disincentive is meant to not promote negligent care but rather judicious care. The insurance company might not be required to pay anything for the procedure. Doctors get paid monthly a management fee per patient which is usually something like a $1.00- $5.00 per patient. The office is paid irrespective of any of the patients assigned to the office ever being seen. The other characteristic difference being that patients are assigned to an office and have limited to no choice in the selection of the office.

Here is a bit of history on the origins of HMO industry. It came into existence largely in response to constant complaints from the consumers about the seemingly continuous price increase taking place in the Medical practice side and the accompanying premium increase from the insurance industry in order to absorb a good portion of this increase yearly. The insurance industry had become previously the gate keepers to procedures allowed. They were in the firing line of the anger from patients and doctors. So the HMO option was devised as a clever method of reducing their responsibility on the decision making being taken procedure by procedure. Medicine, being an emotional topic for the patients, it made more sense to have some of the responsibility and the accompanying blame of deciding on what procedures were to be allowed to fall back on to the doctor’s turf. They further incentivize the doctors to not prescribe procedures willy-nilly by making them less lucrative. For example if a certain procedure under the old set of pricing earned the office revenue of $400.00 now under the new scheme the doctors will probably get $50.00. Legally the doctors cannot withhold a procedure unless they want to risk being charged with deliberate malpractice but by keeping the fee low the insurance industry has made the doctors cost conscious and therefore presumably more judicious in their prescription for a procedure. It was to be a win -win situation for the insurance and the patients. The Insurance industry had less of financial burden and the patient got the procedure much cheaper and only if it was truly warranted. But there was hidden wrinkle in this scheme which has since then become very apparent.

But before we get to that there is the other more important question of why would any doctor or dentist office agrees to sign up as a provider for HMO patients. If the procedure remuneration is very low, in some instances 50- 80 % discounted, how come there are offices that take on HMO patients? 

There are two primary reasons why Managed care has managed to sign up plenty of providers. The first has to do with ground economics. The number of doctors competing for patients especially in areas like California has exploded. The only way the doctors will get patients is to be engaged in an increasingly expensive and simultaneously decreasingly predictable campaign of marketing and promotions. Secondly the patient base has been offered by the same insurance agencies an alternative method of dental care at a fraction of the cost in premiums and copay by signing up with managed care programs. In this environment where there are increasing dental offices desperately seeking patients and insurance agencies pooling dental patients under managed care plans it becomes obvious that the only way to get patients to walk through the door is to sign up as providers for these plans. The patients who have not elected to sign up with managed care are usually doing so because a) they have a long and trusting relationship with a practice which will not sign up with managed care, or b) the out of pocket expense involved is only marginally different between the plans because the employer heavily subsides the premiums, or c) they had a bad experience with managed care style of treatments. In the current economic condition this pool of non-managed care patients has becoming smaller and less dependable for a practice to make long term projection of their business model’s viability.

The wrinkle in the plans:

 This is where the best intentions of all concerned begin to go awry. The patients want care at a reasonable cost, insurance companies want to limit the amount being paid out in benefits and thus improve their bottom line, and the doctors want to have large patient base and a steady stream of new patients to be able to maintain and sustain and grow a viable practice. Unfortunately the formulas used to come up with the remuneration side of the equation are extremely disadvantages to doctors. If an hour of dental office time is valued at $300 - 400.00 per hour then under the HMO scheme the remuneration is sometimes as low as $20- 50.00. The only way an office can survive is either it does more procedures in less time or it upgrades the procedure and charges a premium on the upgrade which will compensate for the extremely insufficient hourly remuneration rate it is stuck with. This is how crowns that would have cost $60.00 to the patients end up being upgraded to $800.00 or more. Some offices have gotten extremely innovative in the department of upgrading treatment. But honestly how can you blame the offices for this practice. If the system they work in, has been taken over and controlled or influenced by 3^rd party like the insurance industry which sets the prices of procedures and determines the availability of patients to the dental offices, then they will end up doing some imaginative and creative dental procedures and billing. 

The other issue the managed care was meant to address was that of annual price increases. Here again ground realities have forced the office to come up with innovative methods of pricing. How can the price increase in Medicine or Dentistry be capped when all other expenditures and financial obligations associated with the business of running these offices have been going up every year? Despite the recession there has been no waving of annual rental increases, lab cost increases, supply cost increases and utilities cost.

So how do offices compete in this environment? One option like I said earlier is to do more in less time. But reducing time by increasing efficiency works only up to a certain extent and you run the risk of doing sloppy work in exchange for speed. The other option is to find the cheapest supplier of products and services like lab services, employees thereby reduce the cost of doing business. The old warning of ‘you get what you pay for’ is true with this method too. Cheap services are not reliable services. The third option is the option of Upgrades. Here the success rate is dependent on how effective they are in convincing their clientele for the need for an upgrade. One other option is to find procedures that are not yet listed on the fee schedule and promote them. In other words new procedure, new equipment usage all of which have not yet been codified by the insurance agencies yet and to charge for them as additional services outside the purview of insurances. (The qualitative increase in the procedure and treatment outcomes are not being questioned here. These new equipments and procedures may sometimes be an improvement on the status-quo materials and procedures in some instances but the evidence of time has not yet been revealed) The bottom line is that the patient who is convinced of the merits of these new procedures and upgrades ends up paying just as much if not more than a conservative treatment using traditional methods. This ends up in raising the average cost of dental care. The price control feature of the Managed care model is thus a myth.

How is it then that a third party has managed to position themselves so dominantly in the medical/dental delivery system and take control of the environment so completely?

A good part of the blame lies with the Practitioners of the Medical and Dental skills. The doctors have helped equate in the minds of the patient the value of the service they get to be equal to what the insurances compensates for. If the insurances refuse to pay for a service, then to the patients this equates as an unsanctioned procedure and therefore of questionable value. Thus in the Doctor Patient relationship the doctors appear place a higher value on their personal interests at heart instead of the patients and the patient have become wary of the advice they receive. They are in need of a neutral third party to arbitrate and this happens to conveniently fall on the shoulders of the Insurance Industry. Ironically the insurance industry’s loyalties are to themselves and their shareholders only. But using the role of a third party arbitrator they have managed to wedge themselves in the private relationship of the doctor and patient. From there they have convinced both to accept their relationship to each on their own terms. Now Doctors’ offices are subject to scrutiny and audits by the insurance companies and have to sign onto contracted fee schedules set by the insurance industry in return for being allowed to see patients signed up with their plans. The patients are also subject to the contracted benefits in return for the premiums and through the contracts procedures is either allowed for or denied and thus indirectly influencing the decision making process for Medico-Dental procedures.

Unfortunately this is the bed we have all helped make and now we have no choice but to lie in it. Is there a realistic solution to this whereby the working relationship between the doctors, patients and the insurances can be reset and made more self sustaining to all parties? More to that in the next blog.