Why Provide Dental Insurance?

Just over half of all employees in private industry participate in employer-provided health insurance, according to the latest Bureau of Labor Statistics data. This compares to about 35 percent who participate in employer-provided dental insurance.

In a time when many employers can barely afford medical insurance, why provide dental insurance? Here are four reasons:

1. Dental insurance promotes well-being. Healthy teeth affect much more than an individual's looks. The American Dental Association reports studies have linked oral bacteria to heart disease, stroke, diabetes and the birth of pre-term, low-birth-weight babies. Regular dental exams can often uncover other medical conditions, which show symptoms in the mouth. For example, uncontrolled diabetes can lead to gum disease.

Regular oral exams can also detect oral cancers. Currently, only half of all patients diagnosed with oral cancer survive more than five years. The Oral Cancer Foundation says early detection can increase the survival rate to 90 percent. Most people who develop oral cancer have used tobacco. However, about 25 percent of cases develop in people who have never used tobacco, making regular dental examinations important for everyone.

Problems with malocclusion, caused by misalignment of the teeth or a "bad bite," and grinding of the teeth can also lead to jaw pain, chronic headaches and gum loss. Regular dental exams can help dentists detect these problems and develop a treatment plan.

2. Dental insurance encourages disease prevention. Many medical conditions can occur unexpectedly, with catastrophic results. But most dental disease is preventable. Dental insurance plans provide higher payments for preventive care and routine treatments than for the more complex procedures needed to treat advanced dental disease. By making routine care (such as exams, diagnostic x-rays, cleanings and fillings) affordable, dental plans promote prevention and your employees' good health.

3. Dental insurance is cost-effective. Group dental insurance generally costs about one-tenth of what group medical insurance costs.

4. Dental insurance is popular. Surveys have found dental insurance ranks just after medical insurance in importance for employees -- ahead of retirement benefits, dependent care benefits and other benefits.

If you want to offer dental insurance to your employees, you have many plan types to choose from. Your options include:

• Indemnity plans - Under this "traditional" insurance plan, the employer pays premiums to an insurance company, which then pays dentists for the treatments they provide to insureds. The plan pays dentists according to a formula-usually a percentage of the dentist's fee, up to a "usual and customary" maximum. The dentist can bill your employees for the difference, or copayment. Most plans also have patients pay a deductible per visit or per series of treatments as well.
• Preferred provider organizations (PPOs) - A dental PPO consists of a network of providers who agree to accept a certain discounted payment for their services. These PPO plans give insureds financial incentives to use these "preferred providers" by paying higher percentages of claims they submit than for those submitted by non-preferred providers. Insureds pay the uncovered portion out of pocket.
• Dental health maintenance organizations (HMOs) - In an HMO, dentists agree to provide specified dental services to members in return for a periodic per-capita payment, usually monthly. Payments do not depend on the number or type of services rendered, and the HMO accepts the financial risk for providing covered dental services to members. Most plans require participants to use an HMO dentist, but some plans provide reduced benefits for members who use out-of-network dentists. A participant may have to pay a deductible, co-payment, or any amount exceeding plan coverage levels. Dental HMOs cost less than indemnity or PPO plans, but opponents say they limit choice and the way they pay providers gives them incentive to render minimal treatment.
• Direct reimbursement plan - With this type of plan, the employer reimburses employees directly for their dental care expenses, eliminating the role of the insurance company. Under a reimbursement plan, 90-95 cents of each dental benefit dollar generally pays for benefits. This compares to about 70-85 cents under a traditional insured program, which also must cover insurer overhead and profit.

However, under a direct reimbursement plan, the employer has to review claims, make payments and handle compliance with benefit laws. When you buy a plan through an insurer, the insurer handles these tasks. If this sounds like too much responsibility, you can hire a third-party administrator to handle administration. (Administrative costs are tax deductible, along with other qualified benefit plan costs.) As with an insured plan, employees also receive reimbursements tax-free, as long as the money is spent for qualified expenses.

Your employee benefits consultant can set up a dental insurance plan on an employer-paid or voluntary basis for your group. Under a voluntary plan, employees pay 100 percent of premiums through payroll deduction. They get the cost advantages of a group plan, plus the convenience of payroll deduction. If the plan is set up under a premium conversion cafeteria plan, the employees' contributions are made with tax-free dollars.