CATEGORIES OF DENTAL PLANS
Direct Reimbursement (DR)
Direct Reimbursement is a self-funded dental benefits plan that reimburses patients according to dollars spent on dental care, not type of treatment received. It allows the patient complete freedom to choose any dentist. Instead of paying monthly insurance premiums, even for employees who don't use the dentist, employers pay a percentage of actual treatments received. Moreover, employers are removed from the potential responsibility of influencing treatment decisions due to plan selection or sponsorship. DR is the ADA's preferred method of financing dental treatment.
The design of the DR plan is selected by the employer to fit the employer's budget, and can therefore vary widely among companies. For example, one plan may reimburse 100% of the first $200 of dental expenses and 80% of the next $1,000, resulting in a total annual maximum benefit of $1,000 per covered individual. Another company may reimburse 75% of the first $1,000 of dental expenses, resulting in a total annual maximum benefit of $750 per covered individual. The totals can be individual or family maximums.
A DR plan may also permit employees to pay their share of their dental expenses on a before-tax basis by establishing dental "flex" accounts. Flex accounts are funded by employees with pre-tax paycheck withholding, and can be used to pay dental expenses that are not covered by the DR plan design. In addition to the employee's tax savings, the employer benefits because the amounts withheld from the employees' paychecks are not subject to FICA taxes. Flex accounts must comply with IRS regulations to insure that the payments qualify for pre-tax treatment.
The ADA, as well as state dental societies, brokers and benefits consultants, can assist companies in estimating how different designs will affect costs. To utilize this service, call the ADA at 800-232-1890.
Indemnity
An indemnity plan is a fully insured or self-insured plan where an assigned payment is provided for specific services, regardless of the actual charges made by the provider. Payment may be made to enrollees or, by assignment, directly to dentists.
Indemnity plans usually allow patients to go to the dentists of their choice. Most indemnity plans reimburse patients based on a Usual, Customary and Reasonable (UCR) system. In other words, UCR plans pay an established percentage of the dentist's fee or the plan administrator's "reasonable" or "customary" fee limit, whichever is less. The limits are the result of a contract between the plan purchaser and the third-party payer. Although these limits are called "customary," they may or may not accurately reflect the fees that area dentists charge. There is wide fluctuation as to how plans determine the "customary" fee level. A UCR element is not exclusive to indemnity plan types.
Preferred Provider Plans
Preferred Provider Organization (PPO) plans allow patients to select a dentist from a list of providers who have agreed, by contract, to discount their fees. PPOs that allow patients to receive treatment from an out of network dentist usually have higher deductibles or co-payments. PPOs can be fully insured or self-insured. They are usually less expensive than comparable indemnity plans and are regulated under the appropriate state’s insurance statutes.
Dental Health Maintenance Organizations / Capitation Plans
Dental Health Maintenance Organizations (DHMO) or capitation plans pay contracted dentists a fixed amount per enrolled family or individual, regardless of patient utilization. In return, these dentists agree to provide specific types of treatment to the patient. The patient may be required to pay a co-payment. Theoretically, the DHMO rewards the dentist for keeping patients in good health, which may help to keep costs low. DHMOs typically offer the least expensive dental plans.
OTHER DENTAL PLAN FEATURES
Discount/Referral Options are arrangements in which employers direct employees to a limited number of providers who have agreed to discount their normal fees in exchange for the expectation of a larger patient pool. There is no reimbursement to the patient or to the provider. A third-party marketer will package and sell a discount program for a fee, in order to cover costs and profits.
Point of Service Options are arrangements in which patients with a managed care dental plan have the option of seeking treatment from an "out-of-network" provider. The reimbursement to the patient is usually based on a low table of allowances, with significantly reduced benefits than if the patient had selected an "in network" provider.
Table of Allowance (sometimes called "schedule of allowance") indemnity programs determine a list of covered services with an assigned dollar amount. That dollar amount represents just how much the plan will pay for those services that are covered. Most often, it does not represent the dentist's full charge for those services. The patient usually pays the difference.
Excerpted with permission from the American Dental Association
