Group Ins.--Estimating Group Dental Ins.

Front 1

Let C denote the average cost per service. Let U denote the number of services per 1000 members per year. Then P, the net claim cost PMPM for a particular type of service, is equal to

Back 1

P = U * C / 12,000.

To compute the net claim cost for a dental plan, per member per month, simply add up all the P’s for each type of service (fillings, extractions, X-rays, root canals, etc.).

Front 2

Sources of Service Cost data, C Plan’s own historical experience is best

Back 2

 Plan’s own historical experience is best
 Dental cost databases (ADA surveys, etc.) are also available

Front 3

Advantage of using plan’s own experience data:

Back 3

 Awareness of any problems with the data
 External data doesn’t reflect the same:
 demographics
 negotiated fee levels
 underwriting
 claims adjudication and Utilization Management practices

Front 4

But plan’s own experience is not usable for:

Back 4

 new plans (with no experience)
 small plans (whose experience isn’t credible enough)
 plans entering a new geog. area or market segment

Front 5

When using a public database, ASoP #23 (Data Quality) requires making sure data is:

Back 5

 appropriate
 must adjust it as necessary to match your plan’s characteristics
 reasonable
 complete

Front 6

Sources of Utilization data, U

Back 6

 national databases
 rate filings of other carriers
 data from third-party administrators or reinsurers

Front 7

Factors affecting claim costs can be separated into:

Back 7

 Characteristics of the plan;
 Characteristics of the insureds.
The latter are also called Underwriting Factors or Rating Factors. They are discussed at length in both General – Rating Factors and in GI Ch. 8.

Front 8

CHARACTERISTICS OF THE PLAN THAT AFFECT CLAIM COST
The Covered Benefits

Back 8

 Which services are excluded? (Missing tooth, Cosmetics)
 Is preventive care encouraged? (this ultimately lowers claim costs)
 the In-network usage incentives
 The more in-network use, the lower the claim costs
 Interaction with the existing group medical plan
 Is oral surgery covered by the medical plan? (if so, dental costs are less)
 the Utilization Management / authorization & referral rules in effect

Front 9

The Cost-Sharing Provisions
Cost-sharing reduces claim costs in two ways:

Back 9

 By reducing costs per service (C)
 By causing patients to lower their utilization (U)

Front 10

Deductibles

Back 10

 lower plan costs, but don’t have an effect on policyholder utilization.
 A stand-alone dental deductible lowers dental costs more an an “integrated deductible”, which can be satisfied by the policyholder’s medical plan expenses, too.
 Deductibles cause leveraging. (See General – Leveraging)

Front 11

Coinsurance; Copays

Back 11

 lower plan costs and utilization.
 Type III services have much higher coinsurance/copays than Type I or II.
 Reducing utilization of Type III often saves on Type I costs, too, since Type I and Type III services are often performed together.

Front 12

Maximum Coverage Limits

Back 12

 Annual & lifetime
 lowest for orthodontics.
 Annual Maximums dampen the impact of claim cost trend.

Front 13

The Provider Reimbursement Method

Back 13

Most expensive
 Fee-for-service
 UCR (usual, customary, and reasonable)
“usual” = what the dentist usually charges; “customary” = the prevailing charges in the area; “reasonable” depends on the circumstances.
 Dentists can balance-bill the patient if they’re not satisfied with the UCR payment.
 Balance-billing increases the effective cost-sharing percentage that the patient must pay.
 Fee schedule
 A fee schedule lists the maximum reimbursable amount for each type of service.
 No balance billing is allowed.

Disadvantages of Fee Schedules to the Ins Cpy:
 If a dentist’s fees were below the fee schedule maximum, the dentist will raise his fees to the maximum. This limits the cost saving effects of this system.
 Fee schedules have to be updated periodically
 This causes periodic spikes in the cost trend
 Fee schedules don’t limit utilization
In fact, dentists will perform more services (“churning”) to make up for their losses.
 Capitation
 The dentist is paid a fixed dollar amount per month for each of his patients.
Least expensive

Front 14

Capitation Adjustments

Back 14

 The projected utilization U in the above method must take into account the fact that capitated providers will try to perform fewer services than fee-for-service providers.
 The Net capitation rate for each dentist is then adjusted for:
 Dentist’s patient distribution by age/sex
 Dentist’s geographical area

Front 15

The Care Management (Utilization Management) techniques used

Back 15

Care Management means making sure patients receive appropriate level of treatment at reasonable costs.

Fee-for-service dentists try to perform more services than are necessary, so as to earn more money.
Care Management methods for Ffs dentists:
 Preauthorization (patient must submit a treatment plan for review before services are delivered)
 Preauthorization must be vigorously enforced in order to save costs.
 Provider Profiling (seeing which providers are most cost-efficient; terminating overly expensive dentists)

Capitated dentists try to perform as few services as possible, since their income is fixed.
Care Management for Capitated dentists:
 Main focus is to make sure these dentists don’t undertreat their patients.
 focus is on quality measures and patient satisfaction.

Front 16

Key drivers of Selection in a multiple option environment

Back 16

 Differences in the benefit richness
 Cost to ee under the different options
 Orthodontics being covered under only one option
 Continued access to the ph’s current dentists

Front 17

Solutions by the dental insurance carrier to reduce antiselection in a multiple option environment:

Back 17

 Underwriting loads
 Min. Participation requirements
 “Sole Carrier” requirement
If an employer offers several dental options, but our ins cpy only insures one of them, it will be hit with unpredictable antiselection. The Ins Cpy wants to be the sole carrier so it can calibrate all of the options the way it wants.

Front 18

The Rating Method (Experience rating vs. Pooling)

Back 18

 Experience rating is more common for Dental than for Medical, since:
 claim costs lower and within a narrower range
( claims more credible)
 Partial pooling is still needed when a group is unpredictable; e.g. when there is
 high turnover
 low ee participation rate
 Experience rating for dental doesn’t need “catastrophic claim pooling”