Managed care bites benefit! Dental benefits may not be extracting the same amount of dollars as core benefits, but it's still important to keep them brushed and flossed

Business & Health, May, 1991 by Martha Glaser

Dental benefits are an oasis of calm in an otherwise crisis-ridden health care system. The cost to employers of dental benefits averaged $321 in 1990, up only 3.9 percent from the year before, according to a survey conducted this past August by A. Foster Higgins & Co., benefits consultants, Princeton, N.J. That modest increase stands in toothsome contrast to employers' skyrocketing costs for medical coverage generally--up 21.6 percent, says Foster Higgins, to $3,161 per employee. Unless the torrid pace is cooled, medical benefits willl exceed $22,000 for each employee by the end of this decade, Foster Higgins predicts.

Smiley face

In this environement, dental coverage looks like the good guy. Beach Hall, director of health care lans, General Motors Corp., Detroit, says dental costs "are pretty well congruent with inflation." The tab comes to about 10 percent of GM's health care bill, "and with the trend line fairly flat, dental benefits for us are not a major issue."

No one shoudl assume, however, that employers are following a hands-off policy on the dental benefit. There's change afoot to make sure that dental's portion of the health care bill doesn't sneak upward, and that payers get the biggest bang for the buck.

There's no magic formula, of course, nor have all employers settled on the same strategy. But what follows are the directions many are moving in, according to the experts.

Putting teeth in dental

The term "managed care" has a fuzziness about it because it's used in a variety of ways. CIGNA, the Bloomfield, Conn.-based insurance carrier, for instance, applies the term only to prepaid, capitated plans, which some call "dental HMOs." CIGNA's Dental Health prepaid program covers about 1 million enrollees in 46 states, and has more than 5,500 participating dentists. Capitated care is growing, says Barbara Price, CIGNA's assistant vice-president, dental marketing, because it gives better benefits at lower cost, saying money for the employer. Savings vary according to the particular plan design, but Price says that capitated plans cost 10 to 20 percent less than indemnity arrangements. Moreover, the capitated plan rates are rising more slowly--6.2 percent in 1991 for managed care versus about 11 percent for indemnity plans.

Seconding Price is Hewlett-Packard Co., Palo Alto, Calif. Three years ago, the computer firm initiated a pilot capitated dental program called Dental Plan II at three sites in the western United States. Today, the program is offered in the San Francisco Bay area; Roseville, Calif.' Corvallis, Ore.' Boise, Id.; and throughout Colorado.

The program was designed--with input from HP--by Donald Mayes, who was then a consultant for the company's third party administrator, U.S. Administrators (now called ALTA Health Strategies).

As an inducement for employees to sign on, Dental Plan II offers a lower deductible ($25 per individual, $75 per family) than the indemnity program, no copay for cleaning and other preventive services, and an annual maximum per employee of $2,500, as compared with $1,500 for indemnity.

"You can buy a lot of dental care for $1,000," says Susan Mariconi, health benefits manager, HP. She adds that the copay and deductible weren't eliminated entirely under Dental II because "that's in line with HP's philosophy of employees sharing the cost. We feel people are better consumers if they bear a portion of the cost."

Good check up

Dental Plan II's results so far have been good. The latest findings show that plan costs fell 4 percent over the last three years to $193 yearly per employee, while the indemnity program's price tag climbed 27 percent to $282. As long as the capitated plan continues to produce such smiling results, HP will expand it to additional sites "with an employee population large enough to support it," says Mariconi.

U.S. HMO Consultants, Cleveland, Ohio, also sees a cost advantage in managed care, including capitated and discounted plans, and even fee-for-service insurance that includes utilization review, quality assurance and similar features.

Maxwell Davis, president of the organization, says that "where we have a managed care and an indemnity product side by side, the managed care one will provide 30 to 50 percent more for the dollar. I'll give you an example: A good managed care organization can provide you with $1.25 worth of direct dental services for every $1.00 spent. But if you give the same amount of money to an indemnity system, many of them will not return more than 75 percent of that in direct services."

Managed care with a smiling face

And there's another plus for capitated plans. As Price explains, for many employers a prepaid dental program "is a nice way to introduce the concept of managed care overall to their employee population. An employer might start with managed dental before offering an HMO; dental is transition for the company."

How often employees choose a prepaid dental plan over indemnity depends on program design and premiums. "We find that when we offer richer benefits and lower premiums under managed care," says Price, "and when we're able to gain access to the employees to explain the program to them, we have anywhere from 20 to 40 percent penetration the first year into an account."