By Nicholas Partridge, President; Five Lakes Dental Practice SolutionsDental insurance plays a significant role in practices, affecting offices broadly. It can affect treatment plans, case acceptance, visit frequencies, office administration, patient relationships, cash flow, and profit margin.
Most Providers Are In Multiple Networks.
80% percent of the US population was enrolled in a dental plan in 2019. That figure was only 43% in 1994. The growth of dental benefits fundamentally changed the practice. It brought about a mass migration of providers into dental networks to attract and retain insured patients.
Today, providers are in-network with more than 8 dental networks on average, and more than half of all providers are in 11 or more networks. Put simply, it’s no longer novel to be a participating provider. Participation simply levels the playing field.
Insurance Companies Are Finding Ways to Control Costs. And You’re Paying the Price.
Treating patients with dental insurance and working with payers has become more complicated. Why? Because insurance companies continue to invent ways to control claims costs more effectively.
There are three primary areas where insurance companies are growing in complexity:
- Dental plan design
- Network management
- Plan administration
The combination of these (and other) efforts have led to an effective decrease in reimbursements and/or profitability over time. A 2017 Morgan Stanley survey confirmed dental reimbursement rates declined 0.7% in 2017 and were projected to fall 2.7% between 2018 and 2019.
Dental Plan Design
Insurance companies are constantly evolving the designs of their benefit plans (the set of rules defining the benefit). Their goal: accomplish a variety of objectives while maintaining tight predictability around claims costs.
For example, an insurance company’s benefit strategy might be to offer a richer benefit than the employer’s competitor to attract current and potential employees. But to offer a richer dental benefit like a $2,500 annual maximum, the company may need to control costs in other parts of the plan. So the plan might also be designed to provide a higher co-insurance percentage for basic procedures when the employee uses an in-network provider, and pay less for an out-of-network provider.
Network Management
With so many providers that have joined plans—and so many providers in-network—the largest insurance companies have been using this leverage over the dental community to keep fees stagnant or even reduce reimbursements throughout the last decade.
Insurance companies also started sharing (“leasing”) their networks with each other. Network leasing adds providers from one network to another. It means networks overlap one another—which expands the networks by further increasing the number of in-network providers. In some cases, network leasing allows insurance companies to access lower reimbursing fee schedules through partners.
Plan Administration
The processes by which plans administer benefits vary greatly—from credentialing, claims submission (requirements), to customer service. While many plans made improvements in the way they do business through technology or process improvement, there are plenty of examples of processes that create more frustration or costs for practices. For example, plans that pay a provider via credit card might require the practice to absorb the processing fee.
Retain Your Pricing Power.
Insurance participation decisions affect contracted rates. While there are many benefits to participating in-network, one of the consequences is accepting a discounted rate as payment in full.
When you accept a contracted rate, you effectively lose pricing power—your ability to raise prices over time. If you’re unable to control pricing, you’re putting pressure on or reducing your profits. For example, the inability to control pricing would impair your practice’s ability to pass through unexpected costs associated with PPE requirements for COVID-19. It also would mean you’d see a reduction in your profits as the cost to deliver services increases year after year.
Put Regular Effort into Monitoring and Managing Insurance Contracts.
When you participate in-network broadly and fail to manage insurance partnerships and regularly review your options, you yield control of your pricing power to the payers.
This is why a practice must regularly put forth effort to evaluate network contracts, and work to maximize reimbursements. Ongoing monitoring and management of insurance contracts allows practices to be as aggressive as possible in maintaining their pricing power.
The underlying reason you joined a network—whether you were recruited, enrolled by a staff member, or doing someone a favor—may no longer be valid.
The decision to participate should be based on:
- Opportunity to attract or retain patients
- Capacity to service those patients
- Financial benefit
- Owner’s goals for the practice
Have an Insurance Participation Strategy.
Given the importance of insurance participation to most practices, dentists must be more focused on managing their insurance participation at a high level. This means you need a well-defined insurance participation strategy.
Your PPO participation strategy should be one of the key issues in your overall business plan. Whether you use a third-party or an internal resource to manage this strategy, you’ll need a variety of data points to facilitate an objective review.
Decision makers should incorporate subjective feedback. It’s important the entire dental team participates in the process.
Internal discussions should include:
- An informal evaluation of payers regarding ease of doing business
- Feedback about insurance from prospective patients looking to schedule
- The role of insurance in case acceptance
Successful offices recognize the impact of dental insurance and understand that its growing complexity requires dedicated resources. Make the commitment to allocate resources—internal or otherwise—to manage your PPO participation as an essential part of your business strategy.