Dental Benefits 101

1. Dental Benefits 101 January 30, 2008 Presenter: Sara Zook

2. Today’s Topics • A Brief History • Description of Types of Plans • Indemnity • HMO • PPO • Network Considerations • Reimbursement Differences

4. A Brief History

5. A Brief History • The dental benefits industry in the U.S. began as a by-product of the health insurance industry. • 1954- Nation’s First Dental Plan- Washington State Dental Service Corporation.1 • In 1962, 1 million people (less than 1% of U.S. Population) were covered by dental benefits.2 • By 1999, 153 million individuals (56% of U.S. Population) had some type of dental benefits.2 • Journal of Dental Education, Future Trends in Dental Benefits, 2005 69: 586-594 • Mayes, Donald S., Dental Benefits: A Guide to Dental PPOs, HMOs and Other Managed Plans, Revised Edition: 2002.

6. Dentists Practice Differently • Most Dentists practice individually • MDs- 35% practice individually1 • DDS- 76.6% practice individually2 • Dentists do not require hospital privileges • What does this mean? (1) Medical Economics, “Do you have the right stuff to go solo?,” Jan. 8, 2001; (2) Journal of Dental Education, Association Report: Trends in Dentistry and Dental Education, June 2001

7. Lost work time Over 164 million work hours (approximately 20.5 million days) and 51 million school hours (approximately 7.8 million days) are lost each year due to dental problems1 Production time lost due to off-the-job injuries totaled about 170 million days; 80 million days were lost by workers injured on the job2 Emergency room costs People in the 19 – 35 age group have more emergency room visits for dental emergencies than medical emergencies3 80% of dental-related emergency room discharges receive prescription for at least one medication3 Dental Cost Pressures Are Increasing Indirect costs of dental problems (1) U.S. Department of Health and Human Services. Oral Health in America: A Report of the Surgeon General. Rockville, MD: U.S. Department of Health and Human Services, National Institute of Dental and Craniofacial Research, National Institutes of Health, 2000; (2) Injury Facts 2003 Edition, National Safety Council; (3) Lewis, Charlotte, MD, MPH, Lynch, Heather MD, and Johnston, Brian, MD, MPH, Dental Complaints in Emergency Departments: A National Perspective, Annals of Emergency Medicine, Volume 42, Number 1, July 2003

8. Types of Plans

9. Types of Coverage1 Capitated Dental Plan • Pure DHMO • Dentist paid on a per capita basis, fixed rate for each individual or family enrolled. • Participant must see a DHMO dentist for coverage. • Typically smaller networks. • Copay schedules. Fee-For-Service Dental Plans • Indemnity • Reimbursement based either on a schedule or UCR. • No network. • PPO • Network of dentists agreeing to accept a discounted level of payment for covered services. • Out of Network option, plan design/carrier determines reimbursement level. • Typically larger networks. • Uses coinsurance. (1) Mayes, Donald S., Dental Benefits: A Guide to Dental PPOs, HMOs and Other Managed Plans, Revised Edition: 2002.

10. Dental Plan Trends PPOs are the only segment with significant growth over this four-year period1 (1) National Association of Dental Plans. 2005 Joint Dental Benefits Report, Enrollment, July 2005; (2) The significant decline in Access/Discount plans between 2000 and 2002 was impacted by the removal of some health plans previously in this category that included a limited dental benefit.

11. Plan Design Components • Coinsurance • Plan maximums • Annual Max and Orthodontia Lifetime Max • Deductibles • Allocation of services • Preventive (Type A/I): Cleanings, Routine X-rays • Basic Restorative (Type B/II): Fillings, Periodontics, Oral Surgery, Endodontics • Major Restorative (Type C/III): Crowns, Bridges/Dentures • Contractual Limitations and Exclusions

12. HMO- A Sample Plan Design

13. Indemnity Plan Design

14. PPO Plan Designs – “Classic” Plan

15. PPO Plan Designs – “Maximum Allowable Charge (MAC)” Plan This plan is not available in every state on a fully insured basis. Please check with an advisor prior to offering.

16. PPO Plan Designs – “Incentive Plan” This plan is not available in every state on a fully insured basis. Please check with an advisor prior to offering.

17. PPO Plan Designs – “Incentive MAC Plan” This plan is not available in every state on a fully insured basis. Please check with an advisor prior to offering.

18. STATE LIMITATIONS ON INSURED PLANS COINSURANCE DIFFERENTIALS Maine Washington Montana Minnesota North Dakota VT NH New York MA Oregon Wisconsin CT Idaho South Dakota Michigan Rhode Island Wyoming New Jersey Pennsylvania Iowa Nebraska Ohio Delaware Nevada Illinois Indiana Maryland West Virginia Utah Virginia Colorado Missouri Washington DC Kansas Kentucky California North Carolina Tennessee South Carolina Oklahoma Arkansas Arizona New Mexico Georgia Alabama Mississippi Texas Florida Louisiana Extraterritorial states include: MA, MS, MT and TX. • No coinsurance differentials are permitted: No distinction can be made in- and out-of-network coinsurance / benefit • Size of differential is restricted: Size of coinsurance / benefit differential in- and out-of-network is limited • Coinsurance / benefit differentials are permitted: These states are silent on the subject of coinsurance / benefit differentials

19. Allocation of Services Type A, B, C & D covered services Type A Preventive & Diagnostic Type B Restorative Type C Prosthodontics Type D Orthodontics • Fillings • Repairs • Periapicals • Pulp capping/pulpal therapy • Endodontics/root canal • Space maintainers • Palliative care • Periodontal maintenance • Periodontics • Rebases/relines • Simple extractions • Surgical extractions • Oral surgery • General anesthesia • Consultations • Inlays/onlays • Crowns • Dentures • Bridges • Implants • Endodontics/root canal • Periodontics–surgery • Oral surgery • Simple extractions • Surgical extractions • Oral exams • Full mouth X-rays • Bitewing X-rays, periapicals & other X-rays • Lab and other tests • Prophylaxis (cleaning) • Fluoride treatments • Space maintainers • Palliative care • Sealants • Orthodontic diagnostics • Orthodontic treatment By reallocating these services, you could save 11%* *Percentage indicates plan savings off of MetLife’s full block of self-funded/insured PPO plans based upon analysis of MetLife’s 2004 book of business. Note: Options may be subject to state regulations.

20. Limitations and Exclusions Lower Cost Alternatives More Robust Fluoride age Once per 12 months Space maintainer age Once per lifetime Periodontal maintenance Combined with cleaning Prosthodontic services Sealant age One per 60 months Fillings R&C Percentile Implants One per 60 months Up to age 19 Up to age 19 4 per year 1 in 5 years Up to age 19 No limit 90th Covered Up to age 14 Up to age 14 2 per year 1 in 10 years Up to age 14 1 per 24 months 80th Not covered Potential savings of 3.5 – 5%* *Range indicates plan savings off of MetLife’s full block of self-funded/insured PPO plans based upon analysis of MetLife’s 2004 book of business. Note: Options may be subject to state regulations.

21. Other things to look for • If the Current Contract Is “Open,” Is the Quote “Closed”?Estimated Price Impact = 1% to 3% • Does the Quote Include Asymptomatic or Naturally Functioning Tooth Limitations? If So, How Are They Applied?Estimated Price Impact = 2% to 3% • Are All Endo., Perio. and Oral Surgery Services in One Category (e.g., Type B) or Are They Split Among Categories (e.g., Type B & C)?Estimated Price Impact = 5% to 25% (8% if 100/80/50) • If the Current Plan Is R&C Based (out-of-network), Is the Quote R&C Based? Is R&C Calculated the Same Way?Estimated Price Impact = 0% to 20% SOURCE: Estimates are based on MetLife data.

22. What You See What You May Get Type I – Preventive – Oral Examination – Oral Examination (hard/soft 6 months?) – Fluoride Treatment – Fluoride Treatment (consecutive months?) – Prophylaxis (cleaning) – Prophylaxis (cleaning) (combined w/ Perio.?) – Sealants – Sealants (per tooth; per lifetime?) – X-Rays – X-Rays (bitewings only / consec. months?) – Oral Surgery – MinorOral Surgery – Fillings – Fillings (replacement limits?) – Endodontics –X-Rays (all other / limits?) – Periodontics – Endodontics (pulp caps) – Periodontics (non-surgical / limits?) – Prosthetics – Endodontics (root canal therapy) (bridges, dentures) – Periodontics (combined surgical limits?) – Crowns, Inlays, Onlays – Complex Oral Surgery (asymptomatic tooth exc.?) – Prosthetics (bridges, dentures) (naturally functioning tooth exclusion?) – Crowns, Inlays, Onlays (Implants / Alt. Benefit?) Type II – Basic Type III – Major Closed or Open List? Adding it all together…

23. Multi-Option Strategies Promote high participation and maximize participation in each plan to avoid adverse selection A recommended dual-option approach: • Cover the same services in both plans • Design differences including: • Both plans should be attractive to the entire population to help avoid adverse selection • Low plan should include greater cost sharing features • Lower plan must deliver significant value at an attractive price

24. Voluntary Strategies Promote high overall participation by keeping rates attractive to most employees (high and lower utilizers) A recommended approach: • Plan design: • Focus on preventive and diagnostic services • Primary allocation of services • Greater degree of cost sharing for major services • Two-year participant plan selection lock in/lock out

25. Retiree Strategies Promote participation through one open enrollment opportunity, no late entrants A recommended approach: • Plan structure • Offer coverage to individuals who have had coverage as an active employee • Pension deducted payments • Plan design • Focus on coverage designed to maintain oral health

26. Reimbursement Differences

27. Types of Reimbursement • PPO Fee • Discounts can vary widely, especially when multiple networks involved • Can be used as reimbursement both in and out of network • Discounts are sometimes applied to non-covered services, amounts above the maximum, etc. • R&C/UCR • The administrator’s determination of an out of network average/reimbursement. • Separate fee schedules for General Dentists and Specialists • Services performed by a specialist (i.e. Perio, Endo, Oral Surgery) at a rate of 70%

28. R&C (Reasonable & Customary), UCR (Usual, Customary, & Reasonable) • For example, MetLife uses the lesser of three things: • The dentist’s Actual submitted charge • The dentist’s Usual charge • Customary Charge (geographic area) • Customary Charge based on a percentile (51st, 70th, 80th, 90th, 99th)

29. Reasonable & Customary- Variances • One administrator’s 90th percentile may not necessarily equal another’s • Differences in definition of geography • 3-digit zipcode • Region • State • Use of only In Network Charges to determine percentile vs. All submitted charges • Using “In Network Only” leads to lower reimbursement out of network

30. Network Considerations

31. What Is the Goal of a Dental Network? To be effective, a network needs to accomplish four essential things: • Lower benefit plan costs • Increase plan participant satisfaction • Promote a healthier, safer environment for patient care • Enhance dental practice efficiencies

32. Retention: What is Turnover? • Two types of turnover • Voluntary • Involuntary • What is a reasonable amount of turnover? (5%, 2% is ideal) • Turnover rate for individual PPO dental offices was 9.0%* • PPO general dentists was 7.9%* • PPO specialists was 4.7%* *NADP, 2004 Dental Benefits Report on Network Statistics, August 2004 (dentists or offices that left a network from 01/01/03 through 12/31/03

33. Questions?