What to consider when offering discount dental plans

By Greg Alterton, CDA Dental Benefit Plan Specialist

As the Affordable Care Act continues to change the health care landscape, one option that has emerged for dentists is to make care available to patients using a discount dental plan.

Discount dental plans operate much like Costco or other large membership retailers: a membership fee is charged for the ability to purchase services at a discount below the standard customary fees charged for dental care.

Discount dental plans are not insurance. One who subscribes to a discount dental plan is not purchasing a defined package of benefits. A dentist does not file a claim for treatment provided, and doesn't receive payment from a third party for the care rendered. Therefore, discount dental plans shouldn't be considered a secondary insurance to offset patient copays or out-of-pocket expenses.

The state Department of Managed Health Care (DMHC) has authority to regulate discount health plans. One of the department's concerns is that discount plans aren't marketed in a way that implies it is insurance. Subscribers to a discount plan will be paying out of pocket for care received, just at a defined discount. The DMHC is also concerned that such plans provide a real discount for care rendered.

Many traditional insurers are now offering discount plans as part of the range of products they market. Other companies have established themselves as pure discount plans, where arranging for a network of providers willing to participate and accept discounted rates is all the company does. DMHC maintains authority to regulate such commercial discount plans, and seeks to have such commercial enterprises licensed under the authority of the state's Knox-Keene Act governing commercial health care plans. Increasingly, dentists are being approached by discount dental companies seeking to sign them into their network. The DMHC, as part of its regulatory authority, is concerned with the possibility of fraud and misrepresentation arising in the case of unlicensed discount plans, and seeks to assure that a dentist signing with a discount network is actually providing a discount below their usual and customary fees.

The California Department of Justice has raised concerns about whether certain discount plan arrangement can actually operate legally in California. Consequently, CDA would urge caution to any member who is considering joining a discount health plan. Such consideration should be raised with your personal attorney.

Aside from commercial discount products on the market, increasingly, individual dental practices are considering forming their own discount arrangement for cash-pay patients, as a way of providing more affordable care to their patients, and as a way of promoting patient loyalty to the practice.

Is a discount dental plan a good fit for your dental practice?

While an in-office payment assistance program for cash-pay patients may be one way dentists can develop patient loyalty, there is a risk in providing discounts to a large percentage of a dental practice's patients. Each dentist should consider whether his or her practice is suited for such a program.

A dental practice operating below capacity, with a low proportion of cash-pay patients, and which has the ability to implement policies to enhance efficiencies in the practice, may be best suited for adopting this type of in-office program for cash-pay patients.

A dental practice operating at high capacity with a high percentage of patients paying cash may not be a good candidate for this kind of program.

Obtaining approval from an in-office plan

The DMHC has authority to review and license discount dental plans in California. The department is charged with ensuring that any type of in-office assistance program offered includes consumer protections.

Dentists wishing to establish in-office payment assistance programs must submit their own program design to the DMHC for review to determine whether the proposed program requires a Knox-Keene license. Dentists are encouraged to review applicable sections of the Dental Practice Act to ensure that their program design is in compliance, including the permissible advertising laws and regulations under Business and Professions Code Section 651 and California Code of Regulations Title 16 Section 1051.

A dental office considering creating an in-office discount or payment assistance program for patients should know that such programs need to be reviewed by DMHC, and in fact, the department has approved many such programs, without the need for the programs to be licensed by the state. Programs allowed have a number of elements in common:
  • A monthly or annual fee paid by the patient. This fee is essentially banked to cover care provided through participation in the program.
  • A distinction between the services that will be provided at no-cost as part of the program enrollment (i.e., diagnostic and preventive services) and which services will be provided at a discount (i.e., therapeutic services). Such a program might look like this:
    1. Diagnostic and preventive services: oral examination and diagnosis, including radiographs, routine oral prophylaxis, topical fluoride application and dental sealants. Services provided at no additional cost to the patient beyond the monthly/annual enrollment fee.
    2. Therapeutic services: periodontal services, fillings and restorative, endodontic services and prosthetic services. Services paid for by the patient on a fee-for-service basis, but at a 10 percent discount from the practice's usual fees.
    3. Participation available to any cash-pay patient.
    4. Details of the program are provided in writing to enrolling patients.
    5. The ability for a patient to disenroll from the program at any time. Patients who dis-enroll will receive a refund for the unused portion of the banked funds.
DMHC is concerned about how such an in-office program is marketed. A description of the proposed program should include marketing or enrollment materials that will be used for promoting the program, a copy of the patient enrollment forms, a copy of the patient agreement/contract, etc. The more program details included with your proposal will assist the department in its review.

Before establishing a program in the office, it should be submitted to the DMHC for review:

Office of Legal Services

California Department of Managed Health Care
980 Ninth Street, Suite 500
Sacramento, California 95814

CDA Practice Support offers various resources to enhance practice efficiencies and help dentists assess capacity, evaluate productivity and determine whether this approach might benefit the practice. CDA members may access these resources at cda.org/practicesupport or by contacting CDA Practice Support at 800.232.7645.