Direct-Reimbursement Dental Benefit Plans
In a direct-reimbursement benefit plan, an employer reimburses an employee for dental expenses validated by a paid receipt, according to the plan's dollar limits. The plan benefits are quoted in dollars rather than services, and the only two cost-control features needed are the percentage of copayment by the employee and the maximum dollar limits of the plan. Deductibles or exclusion of services are not necessary for cost control.
In recent years, an increasing number of direct-reimbursement dental benefit plans have been established successfully in companies of all sizes and types. Large companies that have adopted such plans include Eli Lilly, Public Service Electric and Gas Co. of New Jersey, CTS Electronics, and Kimball International. Two life insurance companies--Midwestern United Life Insurance Co. and Lafayette Life Insurance Co.--use the concept for their employees. In Tippecanoe County, Indiana, eight firms involved in manufacturing, pharmaceuticals, banking, electronics, construction products, and life insurance use direct reimbursement for providing dental benefits. Nine percent of the county's 58,000 employed persons are covered by direct-reimbursement benefit plans. In addition, a number of professionals and small retailers are using the concept.
The Public Service Electric and Gas Co. of New Jersey covers 5,200 employees. Its plan was set up to pay 100% of the first $200 and 80% of the next $800. Richard Quinn, corporate benefits planning administrator, describes his company's experience as follows:
"We are very pleased with the results to date. The more we see of costs of other dental plans that actually deliver fewer benefits to the average employee, the more positive we are about our plan design. When these plans were implemented, we had three different actuaries tell us that we were understating the cost in our estimates. The results have been quite the opposite; in fact we overstated the costs considerably."
Public Service found that it is able to cover virtually all of a family's annual dental bills at more than the planned 80% reimbursement rate. Its plan allows a family to submit up to $1,000 in charges each year, including orthodontic bills. Only 238 families out of 5,200 reached the $1,000 limit in 1983, the first year dental coverage existed. In 1983 the monthly cost per employee was $20, plus an additional $.60 for administrative costs.
Another plan, for 344 employees, had a 16-month average monthly dental care cost per employee of $24.51.
Promoting Direct Reimbursment
Individual dentists are effective in presenting this concept to employers. The influence of individual dentists on business owners and highly placed executives whom they know well is being documented.
Dental societies are also increasing their efforts to provide educational materials to interested companies. The American Association of Orthodontists' Council on Orthodontic Health Care has produced an easy-to-read brochure on direct reimbursement, and the AAO has developed a purchaser contact program that includes promotional materials on direct reimbursement.
In addition, the AAO Council on Orthodontic Health Care has allocated a portion of its $191,000 current advertising budget for promotion of direct-reimbursement plans. In May 1984, the AAO House of Delegates voted an additional $251,785 to aid in this promotion through advertising on the national level.
In Indiana, much is being done to promote direct-reimbursement plans to employers and employee groups. The Indiana Dental Association has hired a part-time purchaser contact, and the Isaac Knapp Dental Society of Fort Wayne has voted to assess its 200 members $200 each for funds to hire a full-time executive secretary, one of whose primary duties will be to promote the direct-reimbursement concept. The North Central Dental Society in the South Bend area developed an advertising campaign that included:
The Indiana Dental Association (402 Jefferson Building, One Virginia Ave., Indianapolis, IN 46204) has produced a nuts-and-bolts kit on how to implement a direct-reimbursement plan. Entitled "Direct Reimbursement-- An Effective Approach to Providing Dental Benefits to Employees", the kit contains an employee booklet for which several city, county, and state dental associations are considering purchasing duplication rights.
The real force in the development of direct-reimbursement dental benefits and the future of the concept lie in the participation of many alert, intelligent dentists, third party administrators, and businesses.
