Employers opting for voluntary dental plans
Humana launches low-cost option to block growth of Delta Dental
By Charles Rathmann, of SBT
While many employers in southeastern Wisconsin continue to pay part of their employees’ dental insurance premiums, some employers are making dental benefits optional, while others are switching to arrangements similar to vision insurance discount plans.
Small business is becoming a fertile marketing ground for discount plans, according to industry figures and dental executives in Wisconsin.
Larger employers still tend to pay part of their employees’ dental premiums, according to figures from Limra International, a Windsor, Conn.-based international association providing research, consulting and other services to nearly 850 insurance and financial services companies.
According to Limra, among companies with 10 and 99 employees nationwide, 51% offer dental benefits. However, that percentage expands to 69% in companies that employ between 20 and 99 and to 88% in companies that employ between 100 and 499.
While dental benefits vary by company size, however, they have not changed much over time, according to Lynn Steinle, a partner and broker for Strategic Employee Benefits Services in southeastern Wisconsin. The company, which has 95 offices nationwide and insures more than 10,000 people in 300 groups in southeastern Wisconsin, is part of the Northwestern Mutual Financial Network.
"The benefits have not changed in 20 years," Steinle said. "The maximum benefit has been at $1,000 and has been there for more than 15 years. Employers are not upping that amount with health care inflation. There is typically a $25 or $50 deductible, but preventive is paid at 100% and simple fillings at 80%.
"Major oral surgery is paid at 50%. There is typically a separate $1,000 benefit for braces or orthodontics."
Other benefits, including flexible spending accounts (FSAs), preferred provider organizations and other delivery methods, have failed to penetrate the dental market, according to Steinle, because dentists have historically been up front communicating about prices and the rate of inflation has been in the single digits.
FSAs, like dental insurance, provide a pre-tax way to pay for dental costs, but employees risk putting too much in the account and losing it at the end of the year.
While Steinle and other professionals are seeing many firms shave costs off their benefit package by making dental benefits voluntary, many employers are still contributing to make sure their package remains attractive.
"You do see plans where the employer is still contributing to the premium," Delta Dental field service representative Jackie Bloomer said. Bloomer handles southeastern Wisconsin for Delta, the market leader for dental insurance in the state. "We still see a lot of the voluntary plans too."
According to Bloomer, Delta has been gaining ground in southeastern Wisconsin at a rapid pace, adding 150 small groups here in 2002.
"The most popular products are managed fee for service plans with 50% or greater employer contribution," Bloomer said. "The second-most popular is a voluntary plan."
While Delta Dental owns the largest piece of the dental insurance pie in the state – with a market share hovering at about 30% — Humana Insurance’s wholly owned dental insurance subsidiary is gunning for some of that market with some new products.
"We have introduced a new product," said Humana Dental president Gerry Ganoni. "What we are seeing employers doing is dual-choicing, and we want to accommodate that. They are saying, "We will pick up the cost of a low-cost plan, but if you choose to buy a better plan, the employee can pick up the difference. There are dual options."
Ganoni said the dual-choice product was gradually rolled out last summer, because of the drubbing Humana has been taking at the hands of competitors such as Delta Dental.
"That is the reason we are doing it," Ganoni said. "We would like to see our penetration numbers close to the numbers you see from Limra. It is important to consider that when an employer buys medical from us, it makes sense to buy dental, too. You have one plan administrator – one contact. It makes life very easy for them."
Bloomer and Ganoni agree that rapid increases in health care coverage costs are commanding the attention of business owners and benefits managers, while dental insurance coverages are increasing at a snail’s pace.
However, Bloomer is seeing health coverage cost increases inducing employers to keep their rich dental packages as a way to make sure their benefits package remains attractive.
By contrast, Ganoni believes employers feel the pinch and want to cut their contribution to dental benefits to compensate.
"The employers are being faced with large increases on the medical side," Ganoni said, stressing that the number of Humana health insurance customers opting into the company’s dental insurance has been slipping. "That is resulting in a large deficit of discretionary dollars. The percentage of the dental of that medical market has been dropping for us. In the small group market, two to 99 employees, what we saw in 2000 was that 24.3% were also buying dental. The most current data through April, we are seeing that number down to 20.3%.
"That tells me most of the time that employers are unbundling the dental and medical," Ganoni said. "We are not buying as much dental as in the year 2000. We are seeing the same thing in the 100-plus group size, with a drop from 21.5 to 19.8."
June 13, 2003 Small Business Times, Milwaukee