Direct Reimbursement FAQ
Q. If Direct Reimbursement is so great, why isn't everyone using it?
A. Many employers who are great candidates for Direct Reimbursement do
not use the strategy because they have never heard of it. Until
recently, insurance brokers did not make any money from DR, so there
was no motivation to present it to their clients. Most employers who
have heard of DR learned about it from their dentists.
Q. If there are no insurance company controls with Direct
Reimbursement, what prevents dentists from inflating their charges or
performing unnecessary procedures?
A. With Direct Reimbursement, patients typically pay the dentist, then
take a receipt back to their employers for reimbursement. Unlike
traditional dental plans that allow assignment of benefits, DR does not
insulate patients from the cost of dental care. Patients have an
incentive, as well as an opportunity, to scrutinize their dental bills
and ask questions about the services. If something appears
inappropriate, nothing prevents an employee from changing dentists to
get better value. Many people don't realize that as much as 50 percent
of the dentistry performed in United States is still paid for
out-of-pocket by the patient. What prevents dentists from inflating
fees with a cash-paying patient is the same thing that prevents them
from doing so with a patient covered under DR. That reason is
competition! With more than 24,000 licensed dentists in California,
patients have an ample selection of dentists to choose from. It is the
marketplace that influences fees more than any insurance company.
Q. If my company has 100 employees, and I offer a plan with a $1,000 annual maximum benefit, won't the plan cost me $100,000?
A.
No. According to the American Dental Association, only 55 percent to 60
percent of people who have dental benefits in United States ever visit
a dentist in any given year. Less than 5 percent of those who have a
dental plan with a $1,000 annual maximum benefit actually receive the
maximum benefit each year. The average U.S. dental expenditure is less
than $160 per person per year.
If an employer wants to know what a potential Direct Reimbursement plan would cost, ADA offers cost projections using a formula based on national averages that accounts for a company's individual needs.
Q. Direct Reimbursement may save money, but can I administer a plan myself?
A.
Yes. Direct Reimbursement simplifies the way benefits are paid, so most
employers can comfortably administer the plan themselves. In many ways,
DR is similar to travel expense reimbursements for employees who travel
on company business. Employees turn in receipts and are reimbursed for
expenses. Experience has shown that only about one man-hour per week is
required to administer a plan for every 100 employees. Computer
software that assists with plan administration is available for a fee.
While most companies are able to administer a Direct Reimbursement plan
themselves, some choose not to. In such instances, we refer those
companies to a third-party administrator with experience in
administering DR plans. They take on those responsibilities for a
monthly fee.
Q. My employees live from paycheck to paycheck. They can't afford to
pay for dental treatment up front and then wait for reimbursement.
A. There are a variety of ways to address this concern. Many California
dentists now accept credit cards. An employee can charge his or her
treatment, turn in a receipt to the employer, and be reimbursed well
before the credit card bill arrives. Two-party checks are another
option. Some employers provide a two-party check to cover the eligible
benefit whenever an employee seeks major dental treatment. Post-dated
checks are another possible solution, and some companies even choose to
reimburse the dentist directly.
Q. I have never offered a dental plan before. Should I expect a run
on claims during the first year of my Direct Reimbursement plan?
A. Typically, no. Most employers are surprised that use in the first
year is much lower than they expected. Employees who are concerned
about their oral health tend to receive dental care whether they have
dental coverage or not. The presence or absence of a dental plan does
not dramatically affect use.
Q. What assistance does CDA offer to employers?
A. Advice on benefit design.
CDA consultants will assist employers with designing a DR plan to meet
their individual needs and budget. If a group already offers dental
coverage, CDA consultants will compose a plan design sure to offer
comparable benefits to the plan already in place.
Cost projections. Using a formula based on national averages, CDA consultants can estimate what a group's potential use would be under a selected Direct Reimbursement plan design. For employers who haven't decided on a benefit design, but do have a tentative budget limit in mind, CDA consultants can provide a sampling of DR plan designs projected to fit that budget.
Plan documentation. One of the requirements of establishing a Direct Reimbursement dental benefit plan is that the benefit must be in writing. CDA offers assistance by providing a pre-drafted sample plan document and summary plan description (SPD) that may be customized for each employer.
Free information and assistance are available from national organizations such as the American Dental Association (ADA) and the Alliance for Dental Reimbursement Plans (ADRP).
Q. How can I find out more about Direct Reimbursement?
A. Free information and assistance are offered as a public service by
the California Dental Association. To speak to a consultant, call (800)
736-7071, ext. 5322, or send an e-mail to patti.cheesebrough@cda.org.
Assistance for employers outside California is available from the American Dental Association.