Bruce Waterman, DMD
In the movie, "As Good as It Gets," Helen Hunt`s character expresses frustration with her medical HMO plan. Apparently, her HMO was denying the tests and treatment her son needed for life-threatening asthma.
The surprising part is when she screamed "y#*@! HMO," the entire audience in the theater erupted into spontaneous applause. The emotional consensus reflected is that managed care is not "As Good as It Gets."
Freedom of choice is a right Americans feel should be inalienable. With the rise of managed care, many are worried that these rights relative to health care could become just a memory. These patriotic principles were the guiding force that united a small, diverse group of dentists to create a new dental-insurance concept called "direct assignment" (DA).
I was fortunate enough to be one of the four dentists in this group, which also included Dr. John Harrison, an orthodontist; Dr. Randy Hedrick, an endodo-ntist; and Dr. Frank Giunta, a general dentist like myself. Dr. Giunta is the chairman of the Council on Dental Care for the Florida Dental Association. All of us are from the Tampa/St. Petersburg area of Florida. None of us has financial ties to the direct-assignment concept nor to products within this category. It truly has been a patriotic dedication to a worthy cause.
DR and DA
To understand direct assign-ment (DA), we must first be familiar with direct reimburse-ment (DR). DA is basically a hybrid derivative of DR. DR has been around for more than 20 years with limited success. The concept is great because it promotes freedom of choice, fee-for-service dentistry in a competitive, affordable product.
DR is an efficient, self-funded plan. This means that an employer funds the plan totally by collecting employee and/or employer contributions (similar to premiums) and then self-administering the disbursement of funds. Employees go to the dentist, pay for their care upfront and are reimbursed by the DR plan based on its self-funded plan design and monetary limits. The plan contribution and plan design are based on actuarial data that predicts the funding needed to cover anticipated utilization of the group.
Direct reimbursement works great, but its main problem always has been convincing the employers of its viability. DR largely has been sold by the efforts of dental associations and inspired dentists. Dentists trying to help promote DR, like Dr. Harrison, learned first-hand the actual problems that limit DR marketability. Direct assignment grew out of developing solutions to the problems and limitations of DR.
Problems With DR;
Solutions Under DA
1. Risk to Employer - Since DR is a self-funded plan, there is a risk that funds collected may be exceeded in expenditures by utilization of the group (deficit-spending). The employer would have to come up with the cash to cover the difference. It is tough to sell a product to a company with the understanding that it could lose money providing this benefit. Dentists, as business owners, should understand the uneasiness this risk could cause.
Solution under DA - An optional, special type of insurance, called stop-loss insurance, can be added to a DR-type of plan to eliminate this risk to employers. This was a critical innovation in the development of DA. Of the 67 DA-type plans sold in Florida as of January 1998, 69 percent have opted for this safety net. Without DA and its stop-loss insurance, self-funded plans covering 41,000 patients probably would not have been sold. Additionally, most municipalities require stop-loss insurance before they even will consider a self-funded plan. Consequently, the ability to offer this option opens a previously excluded market.
2. Professional Marketing - As savvy as dentists and their associations may think they are at marketing, if you look at the multimillion-dollar competition from the insurance industry, we are not a match in budget or salesmanship. Good intentions will not sell this product. Direct reimbursement is thus limited by the lack of professional marketing and the associated commission incentives.
Solution under DA - The DA-type plans sold in Florida have built into their plan design funding for professional marketing. Once the infrastructure of DA education for dentists and employers was established, the marketing in Florida gained considerable momentum. From July 1997 to January 1998, Florida saw a 286 percent increase in the number of DA-type plans installed. As a result, Florida has become one of the top sellers of self-funded plans in America.
3. Assignment Options - DR requires that patients front all the money for their treatment. For some patients, this financial burden may restrict them from receiving the needed care, even though they have paid for a dental-benefit plan.
Solution under DA - DA products have the option of adding an assignment feature (thus the name direct assignment). The dentist can choose to accept assignment of benefits per the plan design. For many patients, this may make the difference in receiving the care they need. The dentist also has the freedom not to accept assignment. When this occurs, the plan functions more like DR.
4. Administration - DR usually requires that an employer must self-administer the plan. The employer must collect the contributions (premiums), adjudicate the claims, and issue reimbursements to employees. This is a burden that many companies do not want to undertake because it adds to their office logistics and staff costs.
Solutions under DA - DA provides the option of administration by a licensed, third-party administrator (TPA). One potential DR account I know of wanted to buy DR until the company found out it would need to administer the program itself.
When the DA product was offered as an alternative with administrative servicing by a TPA, the account was sold. Many TPAs also have expertise in helping these businesses set up Flex Plans (Section 125 Plans) to augment their fringe-benefit plans. This enables employees to pay for their benefits with pretax dollars and save 22 percent to 36 percent of premium dollars (dependent on their individual tax brackets). Thus, a $15 premium can net out to be equal to $10 or $12 when tax savings are applied.
Market determines success
The needs and expectations of the marketplace are diverse, as reflected by the successful implementation of these self-funded plans. That`s why we need some diversity in products built around the self-funded, fee-for-service theme. DR and DA are not mutually exclusive, but appear to open doors of opportunity for each other. Because of DA, more DR has been sold in Florida in terms of covered lives within the last year than in the previous 10 years combined. DA and DR are part of our patriotic menu - not the final answer, but rather an improvement in benefit options for our patients.
Dr. John Harrison has said, "We stand on the shoulders of those who came before us." Dr. Harrison`s quote correctly acknowledges that the development of DA is a tribute to those dentists and dental associations that toiled for years to promote DR. The Florida Dental Association has done a tremendous job in educating dentists and employers about the benefits of DA- and DR-type plans as part of their endorsement* of these concepts. The South Carolina Dental Association also has endorsed* the concept. The ADA* has kept the DR flame alive. We are looking forward to the ADA`s upcoming DR marketing campaign in Florida as part of its national effort.
The American Association of Orthodontists (AAO) has supplied a tremendous service by compiling and providing the statistical data critical to the actuary soundness of these self-funded plans. John Stoner and his insurance agency have worked tirelessly with our group to innovate, create, and facilitate DA`s implementation. We also must salute the Bankers Insurance Group of Florida for taking a risk in offering the first stop-loss insurance and for developing the first prototype DA product. By working with the insurance industry, we have achieved the ultimate in supplier enhancement.
I would encourage your state associations to work with the Florida Dental Association and the ADA to determine the feasibility of also adding DA-type plans in your region. By providing the leadership to truly serve our patients, we can live by the credo: "The best way to predict our future is to create it."
*It should be emphasized that the endorsement of the DR and/or DA concept by an association does not imply endorsement of any particular product or a call to action for dentists to collectively accept DA/DR-type plans or boycott any other type of dental-benefit plan. Each dentist is encouraged to make an independent decision about whether to accept and/or promote any particular dental-benefit plan. Association efforts are educational in nature to its membership. They provide a public service to the patients their membership and the profession serve.