Voluntary Dental Can Ease The Bite On Employers’ Benefit Expenses
Many employers, stung by continuing increases in health insurance premiums, are looking for ways to save some money on their ancillary employee benefits programs.
One specific benefit program under pressure is dental insurance–especially the traditional dental programs that have the employer fund the entire premium.
Aggravating the overall benefits expense dilemma for employers is a parallel trend: Dental insurance premiums have also increased significantly over the past five years.
The dental premium increases certainly do not appear to be on the same high cost spiral as those for medical insurance. And at least some of the higher dental premiums we have seen seem to have been a result of the traditional sales and marketing methods and the administrative inefficiencies present within the dental insurance industry itself. Even so, the dental plan business is facing some definite expense challenges it needs to address.
Our recent analysis of the marketplace has shown many employers are either completely discontinuing or, at the very least, shifting a significant part of the cost of dental insurance to their employees. These cost-shifting scenarios typically fall along the lines shown in the chart. And they appear to hold true, regardless of employer size–both small employer clients (under 100 lives) and larger ones have felt the pinch.
There is a silver lining to this dark cloud, however. It is this: The higher employer costs have opened the door for marketers of voluntary dental programs. Many have reported success in making new sales in this area.
If you are planning to approach this market, the following are some strategies you might want to consider.
Provide information to clients about a voluntary program.
In our experience, the typical voluntary plan design that employers initially want is one that mirrors the benefits structure of the employer-paid plan. That means low deductibles, higher maximum benefits, and, unfortunately, a resulting premium that can often prohibit good employee participation. Therefore, also do the following step.
Bring other plan design options to the table during the quote evaluation process.
This will help you keep a balance between appropriate premiums and high participation. Here are some of the design changes we believe could become much more popular in the future:
–Increase the annual benefit deductibles from the popular and traditional $50, up to $75 or even $100;
–Apply deductibles to preventive care, not just basic and major;
–Offer to pay for only one cleaning and oral exam per calendar year for adults;
–Increase the calendar year maximum benefit to $1,250 or $1,500, instead of the traditional $1,000 or less as a partial offset to the previous three changes.
–Re-establish scheduled benefit dental programs.
Take a realistic, long-term approach when marketing, installing and servicing the voluntary dental program.
For instance, avoid the temptation to sell low up-front “teaser” premiums with a guaranteed high renewal increase. This only escalates the expense challenges and causes credibility issues with customers.
Based on what we have heard in the marketplace, there is a growing concern that, if certain sales, administration and resulting pricing practices dont change, voluntary programs wont be the long-term solution to the employers expense challenge. For instance, passing on the benefit costs to employees through a voluntary program certainly lessens the burden on the employers pocketbook. But it doesnt take on the real dilemma of establishing an appropriate premium level on both an initial (new case) and ongoing (renewal) basis.
The point is, whether it is the employer or the employee, someone still has to pay the premium. Hence our call to adopt more realistic, long-term approaches.
Make full use of education programs specifically aimed at producers and employers.
These help both client and producer better evaluate the hard and soft costs of dental insurance benefits, especially the costs associated with moving coverage from carrier to carrier upon renewal.
Remember, though shopping for the best benefits at the lowest rates each year may provide clients with immediate expense relief, it can ultimately cause other challenges that increase everyones resource needs and expenses for any type of dental program. Such challenges would include: additional employer administration expense; benefits misunderstandings; re-enrollment meetings; delayed claims payment; and new administration and processing procedures.
Gone are the days of fully employer-funded dental benefit programs. Since most insurers have similar internal cost structures and rating philosophies, creativity in plan design options along with better sales and marketing techniques–especially at renewal–can help offset the premium challenges felt by our end customers.
Pursuing these types of options now will help your dental business for the long term.
are co-owners and principals of Meridian Benefits Companies, a Charlotte, N.C. intermediary distributor and administrator of ancillary employee benefits.Their e-mail addresses are firstname.lastname@example.org and email@example.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 17, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.