An in-house discount plan is offered by the dental practice and purchased by a patient for an annual fee in exchange for a discount on dental services. However, the discount plan is not an insurance plan, instead it is a written agreement between the patient and the practice that offers the patient stated discounts for specified dental services.
In California the Department of Managed Health Care has authority to regulate discount health plans. The discount plans the department would regulate are large commercial businesses that have developed substantial networks of providers willing to extend a discount to consumers who buy into the discount plan. Simply put, a discount health plan functions like a discount or wholesale warehouse retailer. The consumer purchases an annual membership and then can purchase goods and services at a discount rather than pay regular retail prices. Without the membership, access to the discount is not available.
The Department of Managed Health Care is concerned about how such discount health plans are marketed, specifically that they are not marketed as risk-bearing insurance products. With discount plans, the patient bears the financial risk as there are no claims submitted for treatment – but the patient does experience savings on health care. The department is also concerned that a discount health plan’s network of providers is authentic (meaning that the plan has an agreement with its network of providers and a mechanism to notify subscribers of discounted care available through those providers). Also, the department is concerned that the advertised discounts are actual discounts – that if a discount health plan is claiming that a patient can save, for example, 15 percent on the cost of care, he or she is actually experiencing a 15 percent savings off the provider’s usual and customary fees.
Large, regional, commercial ventures marketing discount plans are required to be licensed by the Department of Managed Health Care under the authority of the Knox-Keene Act. Small, practice-based discount arrangements may not rise to the level of having to be licensed as a Knox-Keene plan, but the department would like to review such discount designs a practice may have, just to make sure.
If the in-practice discount arrangement is to be offered on a subscription basis, the department will want to know how the discounted is marketed. If the discount plan is marketed beyond the dental practice itself, the discount plan may rise to a level of concern that the department will want the practice to license the proposal as a discount health plan.
Dentists should note that in informing patients, or prospective patients, that discounts are available for cash-pay patients, Section 1051 of the regulations to the Dental Practice Act require that certain information be made available to patients. An advertisement of a discount must include the following:
Patients with some form of dental coverage or benefit to offset their out-of-pocket cost are more likely to accept a treatment plan. Offering an in-house discount plan can assist with attracting new patients and help retain existing patients those patients without any form of dental coverage.
These in-house discount plans can vary from one dental practice to another. Some practices may choose to only offer only one discount plan, while other practices may decide to offer several plan designs. Since the dental practice has control over the discount offerings, the plan can be developed based on the needs of the patients.
The ADA Council on Dental Benefit Programs has developed a toolkit to help dental practices evaluate whether an in-office dental plan option is right for them. The toolkit includes:
The ADA toolkit also contains a calculator in Excel spreadsheet format to help predict the financial impact of adopting an in-office dental plan. Please keep in mind that the ADA toolkit is meant to offer broad suggestions and information. Dentists offering an in-house discount plan are responsible for obtaining the necessary approval from the appropriate state regulator.
If your practice is considering offering an in-house discount plan you should be aware that the California Department of Managed Health Care has authority to regulate discount health plans in California. The department has asked that any dental practices wanting to establish an in-house discount plan should have the plan(s) design reviewed by the department.
Send the information on the in-house discount plan(s) design to the below address for review and approval, prior to implementing it in the dental practice.
Office of Legal Services
California Department of Managed Health Care
980 Ninth Street, Suite 500
Sacramento, CA 95814