Jan 28, 2012

Over-the-Counter Drug Coverage (Self Help)

One of the more significant changes in the industry over the past five years has been the move by some plan sponsors, including many employers, to cover over-the-counter (OTC) medications under the pharmacy benefit. Recognizing the market potential, some pharmaceutical manufacturers have shifted particular medications directly to OTC status, creating a broader range of drug therapies that provide valuable therapeutic benefits at much lower costs. Allergy medications, pain relievers, including nonsteroidal anti-inflammatories (NSAIDs) for arthritis, proton pump inhibitors (PPIs) for acid reflux, and agents for migraine relief are just some of the examples of medications now available as OTCs. The government has helped to pave the way for OTC coverage under a health plan with the 2003 Guidance from the Internal Revenue Service stating that employers can reimburse for OTC drugs with pretax funds, such as FSAs. Under most OTC benefits, members will pay the lowest copay, typically $5 to $10. OTC programs also typically cover a more lengthy supply of drugs (e.g., 42 doses for a PPI drug versus 30 to 34-day supply for a branded or generic version). Combined with strong member education on the therapeutic value of such products, OTC programs can help to encourage the use of the lowest cost medications possible within a therapeutic category. OTC coverage works particularly well within a mail service program, allowing the PBM to better track utilization and possible drug interactions, while providing an even more cost-efficient product for members. In addition, a key component for an effective OTC program is strong physician involvement. Pharmacists and medical directors within PBMs can again play an important role in this effort by helping to coordinate development and distribution of appropriate and relevant educational materials to prescribers.
The potential value of an OTC program is clear. For example, current estimates suggest that the cost to treat migraines over a 30-day period using an OTC product versus the newest prescription medication is $10 per member per month (PMPM) for the OTC versus $175 PMPM for one of the newest prescription migraine products. For many migraine sufferers, the OTC medication will provide the necessary relief, thus saving the plan sponsors significant dollars. Clinical pharmacists and medical directors within PBMs can work with physicians and plan members to provide education on how to identify warning signs for migraines, appropriate OTC options and when to seek physician support and non-OTC options. This same approach can be used for other OTC medications as well.
While not all plan sponsors require a prescription to secure coverage for OTCs, many pharmacists believe that prescriptions are important for some categories of medications. For example, individuals using PPIs—whether OTC or prescription—must be carefully monitored to prevent progression of the disease and other side effects. Requiring a prescription before payment is made will ensure that physician and pharmacist oversight is given.
Some PBMs are working with their customers to develop a "step therapy" approach to OTC drug benefits. This has the potential to provide significant cost savings to employers. There are a wide selection of OTC options for popular therapeutic categories including NSAIDs, asthma and allergies. An experienced PBM can work with the employer and physicians to develop programs highlighting OTC options.
PBMs with contracted networks of pharmacies can institute electronic edits that would alert pharmacists to instances where OTC options are appropriate. The pharmacist can then contact the physician, and, if approved, move from a prescription to OTC medication. This approach is also known as "first line" therapy and has produced significant savings for many plan sponsors. Under this approach, the patient tries the first line therapy (often an OTC or generic) first and if there is not an appropriate response, moves up to a higher dosage or branded medication. When combined with education and physician and PBM oversight, such programs can achieve financial savings while ensuring patients access therapies that address their needs.
Physicians and PBM pharmacists caution that just switching to an OTC does not guarantee savings—particularly when its impact on pharmacy and medical expenses are considered. The key is to analyze the most heavily utilized therapeutic categories, determine if there are appropriate OTC options, and include those OTCs as one choice, while also offering generics and a branded option on the formulary. This will enable physicians and patients to select the drug that will provide the optimum value. Involving the PBM in the decision as to which drugs need prescriptions and how best to incorporate an OTC benefit can ensure that plan members and the plan sponsor secure the best cost and outcomes from the benefit design.

Jan 24, 2012

The Growth of Pharmacy Benefit Plan Alternatives

While there are many "alternative" pharmacy benefit plans discussed in the marketplace today, some of the newest ideas under discussion include:
  • Reference based pricing
  • Reverse copays
  • Coinsurance
  • Consumer directed health care (aka, Consumer-driven health care)

Reference Based Pricing

Reference based pricing (RBP) is a reimbursement mechanism in which payers set a ceiling price for medications that exhibit similar therapeutic benefits. While utilization of RBP in the United States is low, it has become one of the more popular pricing mechanisms for government and private-sponsored plans in Europe and over the past few years has gained considerable attention in the United States.
Under a reference based pricing program, managed care organizations (MCOs) and PBMs do not directly regulate drug pricing; rather, they attempt to constrain costs by setting a reimbursement threshold for individual drug classes.
Essentially, the payer determines a "reference price" or maximum reimbursement amount it will pay for drugs within specific therapeutic classes. The reference price is derived by analyzing cost and outcomes data and determining which drug in a class offers a reasonable clinical value among its peers at the lowest possible cost. The drug selected should have the ability to provide expected clinical outcomes to the greatest number of plan beneficiaries. The cost negotiated by the PBM becomes the reference price.
Typically, RBP is used for formulary or preferred medications. There is one therapeutic agent per category, which is priced based on RBP methodology. While employees or plan members have a choice of medications, if they select a medication that is priced higher than the reference drug, they are responsible for the price difference.
Advantages/Disadvantages.  In general, RBP programs have shown the most success in countries that offer a national health care system, under which price setting, drug classification, and other policy decisions are highly centralized and administrative costs are lower.
However, U.S.-based proponents argue that despite differences in governance, RBP is still more effective than current cost-sharing methods at: (1) helping patients understand the true cost of their prescription drugs and therefore, becoming better health care consumers, and (2) creating competition among manufacturers. RBP proponents argue that this structure encourages pharmaceutical manufacturers to offer lower prices to PBMs and health plans in an effort to secure a position on formularies as the reference drug in a particular therapeutic or drug class.
Opponents argue that RBP creates an economic barrier to medically necessary drugs for lower income beneficiaries—the greater the price difference between the reference drug and the most expensive drugs in the class, the more likely that a beneficiary will decide to forgo the prescribed treatment or settle for a less costly treatment that may be clinically inappropriate for their condition. If the reference drug is a lower-priced generic, the difference between it and a new branded drug can be substantial, placing a potentially valuable drug therapy out of reach for many plan members.
Another issue influencing the potential viability of RBP is that unlike Europe, where reference based pricing is more prevalent, the U.S. has a free market system—where drug manufacturers are free to negotiate prices with various purchasers. Other challenges include the analysis of drug categories, selection of the right drug to be used as the therapeutic reference, and the determination of which agent provides the net lowest cost option. For example, payers may not benefit from RBP in all therapeutic areas. RBP is most appropriate for classes where there are significant differences in cost and outcomes for various branded and generic alternatives. The reference drug must also be the most appropriate choice available to treat the highest percentage of patients possible.
Within the current free market health system, RBP can present major pricing and administrative challenges that can dilute the cost savings generated. Determining the RBP involves careful analysis of cost, negotiation with manufacturers and several other steps. If that effort is spent on drugs that only benefit a small percentage of patients, particularly if those patients are also subject to prior authorization, or other administrative processes, the resulting cost-savings could be offset. However, despite concerns, some plan sponsors have opted to explore RBP. For employers who are considering or using RBP, it is important to note that patient education is critical to the potential success of the program. The plan sponsor's PBM must work closely with the employer to ensure that members understand the details of their pharmacy benefit and cost implications of RBP. The PBM must also work to help ensure members make health care decisions based not only on the cost of the drug, but on outcomes. In addition, the program must be carefully implemented by a PBM with expertise in negotiating pricing, understanding pricing trends, and working with physicians to provide necessary education.
While RBP could be viable for very large payers, and theoretically can result in significant cost-savings for the payer, there are many uncertainties. RBP should not be adopted without careful analysis of advantages and potential problems.

Reverse Copay

Under reverse copay, the payer/plan sponsor has a fixed allocation for pharmacy benefits for employees. Under a traditional copay benefit structure, the plan member would pay a set amount—typically ranging from $5 to $50—for each prescription. Under reverse copay, the plan sponsor would pay the copay—an amount established by the benefit design—and the member would pay the remaining amount. Some employers favor reverse copays because they are insulated from drug price inflation as their unit costs are fixed.
Reverse copay works particularly well for some high-cost categories of drugs. This strategy puts the onus on plan members to understand their pharmacy benefit and to work with their physician to carefully choose which drug can provide the greatest value based on their individual need. Furthermore, unlike some benefit plans today, reverse copay is relatively simple for the majority of plan members to understand. Employers with strong benefit communication programs and those who work with experienced PBMs may find some value with a reverse copay approach. However, as with other benefit design options, it requires monitoring to ensure the program does not penalize the sickest plan members as well as those with a limited income.


Twenty to 30 years ago, most major medical health plans used coinsurance as opposed to copays. However, until recently this benefit design option had fallen out of favor because copays are simpler to implement, more predictable in price, and often more affordable for plan members. Recently, some health plans have begun to revisit the tactic of replacing or augmenting drug benefit copayments with coinsurance.
With coinsurance, employees/plan members pay a percentage of the cost of each prescription dispensed, often after meeting a deductible. When structured properly, coinsurance can help the plan sponsor to save their benefit dollars. Some plans, particularly those with traditional benefit designs, have realized savings of up to 20 percent upon implementation of prescription coinsurance.
There are many ways to structure coinsurance programs. One health plan, which offered $2 copays for generic drugs and $9 for brand-name drugs, switched to a coinsurance plan wherein employees paid 20 percent of a drug's cost, with a $50 out-of-pocket maximum for each prescription and an annual out-of-pocket maximum of $1,000 for single coverage and $1,500 for a family. While this structure shifts the responsibility of cost-saving to the plan member, it does protect against more catastrophic costs.
What Proponents Say About Coinsurance.  Coinsurance can be used for a variety of drug therapy categories. For example, a plan may institute coinsurance for lifestyle drugs only. This allows limited coverage for popular drugs, such as Viagra and Propecia, while ensuring that the plan member has a greater financial stake in the decision to use a lifestyle drug.
Plan sponsors like the fact that coinsurance is readily understood by members: "If a drug costs $100 and my coinsurance is 20 percent, I pay $20.00 and my health plan pays $80.00." Coinsurance also helps the plan sponsor adjust for the cost of inflation; if drug prices increase by 10 percent, coinsurance passes a proportional amount of the increase to the beneficiary.
As with many of the alternative plans under discussion, coinsurance also allows the employee to pay the commensurate share of the cost of drugs, ensuring they become more cognizant of the actual cost of the drug. In fact, many employers believe that one of the most important features of a coinsurance plan is that it helps plan members to better recognize and appreciate the true cost of their pharmacy benefit.
What Critics Say About Coinsurance.  One of the primary concerns many clinicians and consumer advocates have with coinsurance is that plan members never know what they are going to pay for a prescription. Copays are predictable ($10, 20, etc. per prescription). However, there are many variables affecting the price of prescription drugs under a coinsurance program, such as different prices by network pharmacies, time of year of purchase, price increases from the manufacturer, supply chain shortages, distribution, and so on. These constant changes in pricing can be especially challenging for members on a fixed income. In addition, members used to paying fixed copays may perceive coinsurance amounts as an indication that the medications are "not covered" thus creating confusion or resulting in under-utilization of the coinsured drugs.
Recognizing the impact of coinsurance and copays on members is perhaps one of the most important issues for plan sponsors considering this option. A recent study by the Rand Corporation noted that utilization of drugs decreases when out-of-pocket costs increase past a certain threshold.
Some analysts are concerned that if costly drugs have a high coin-surance rate, it may drive members to use less effective drugs to save money or to forgo treatment altogether, either of which could lead to higher overall health plan costs. Another key issue to consider is that many PBMs have found low satisfaction rates among members with coin-surance. While this may be due to uncertainty over cost, and may be attributed to poor benefit education, it is a factor that plan sponsors will want to consider.
Critical Coinsurance Issues to Consider.  While there are concerns associated with this option, some plan sponsors may still want to proceed with exploring a coinsurance approach for their benefit. If so, there are some important steps that should be taken with the PBM or a consultant:
  • Examine what the plan sponsor and plan members are currently paying for copays.
  • Conduct a full analysis of historical claims. For example, if a $100 prescription has a $25 copay, switching to a 20 percent coinsurance may not provide the savings or value for either the plan sponsor or plan members' needs.
  • Analyze current claims data to better identify which therapeutic categories have the highest utilization, for what condition and by which plan members. A plan sponsor may want to forgo coin-surance if the price of the identified categories will increase costs significantly for chronic drugs.
  • Factor in rebates. A straight coinsurance program may reduce rebate income if the coinsurance is calculated on the net price of the drug (less estimated rebates). Plan sponsors that depend on rebates to offset PBM costs would have to give notice to their members that rebates would not be figured into the net price used for calculation of the coinsurance amount, thus potentially increasing out-of-pocket costs for members.
  • Talk to legal counsel if the plan decides to move to coinsurance. If the actual coinsurance amount is higher than what the price would be if discounts were added in, the plan could be subjecting itself to legal action. This occurs when there is a large rebate on a drug, reducing cost to the plan by an amount greater than the payer's coinsurance obligation. In effect, the health plan would make money at the expense of reducing costs for the member. While rare, this instance would result in perceived inequity and might precipitate a legal challenge.
One of the more important aspects to analyze when considering coinsurance is its potential impact on mail service. Mail service programs provide cost efficiencies for members as they can receive a 90-day drug supply for a 30-day copay. However, with coinsurance, there is no financial incentive to use the mail service and members who rely on mail service for drugs to treat chronic illnesses, or who prefer mail service for its convenience, will be penalized if a plan sponsor moves to a coinsurance design if the design extended to the use of mail service prescription drugs.
Mail service enables PBMs to offer pharmacy programs to employers for a lower cost as they can negotiate better rates with manufacturers and pass those savings along to clients. Additional issues involving mail service and coinsurance are that members may not have a clear idea of what their coinsurance is when they mail in a prescription every three months. This can reduce the efficiencies of mail service since a fixed copay is easily understood by members and there are few expenses, such as those associated with complicated member billings and bad debt (more likely to happen with coinsurance). These issues can be addressed, however, through education, mailings to members, online websites and a knowledgeable and strong customer service department within the PBM.
It is critical that payers work with a PBM experienced in developing pricing strategies to ensure that coinsurance amounts meet the goals of the employer without negatively influencing the plan member in terms of financial burden and potential negative outcomes.

Consumer Directed Health Care

While the pharmacy benefit designs discussed have generated considerable attention over the past few years, consumer directed healthcare (CDH) is currently creating the most excitement and debate within the pharmacy benefits marketplace. CDH has been a benefit option, albeit under a different name, since the 1980s in the form of high deductible plans. CDH plans include flexible spending accounts (FSAs), medical savings accounts (MSAs), health reimbursement accounts (HRAs), and most recently, health savings accounts (HSAs). The common thread among this profusion of acronyms is consumer control over dollars deposited in a tax-favored health care spending account.
Until very recently, the most prevalent form of CDH has been FSAs. Also known as IRS Section 125 Cafeteria plans, FSAs have allowed individuals to redirect a portion of their salary—generally between $2,000 to $5,000—into a tax-favored account. Recent CDH-friendly legislation has given rise to newer forms of CDH plans, namely, HRAs and HSAs. HRAs are emerging as the most popular type of CDH plan among employers and employees. HRAs differ from FSAs in that the employer (not the employee) funds the account and any unused funds may be rolled over from year to year (the use-it-or-lose-it rule does not apply). The employer funds the account as claims are submitted, and the funds are not considered a taxable benefit. 
Many employers are also beginning to explore HSAs–part of the landmark Medicare drug bill passed in December of 2003. While the majority of consumers assume this legislation dealt with Medicare only, in reality, it also included several provisions for employer-sponsored health care benefits—HSAs among them. HSAs combine inexpensive, but high-deductible health insurance plans, with a tax-advantaged savings account. The concept behind HSAs is to encourage people to be more prudent in their management of medical expenses.
CDH and Prescription Benefits.  Currently, even among employers offering a CDH benefit, most prescription costs are covered through a traditional, pharmacy benefit. However, fueled by employer demand for CDH, insurance plans and pharmacy benefit providers are looking to expand their CDH offerings by integrating a pharmacy component.
When considering a CDH plan, there are some important issues to explore. The ability to acquire outcomes and utilization data under a CDH plan has been virtually nonexistent to date, meaning employers have little idea as to where employees are spending their prescription benefit dollars. In addition, most CDH plans provide few opportunities to target programs to meet specific needs of employees.
However, one of the most important issues for plan sponsors to consider is whether the CDH plan has the ability to promote quality care and provide fair and affordable coverage for all plan members. According to a 2004 report entitled, "Rhetoric vs. Reality: Employer Views on Consumer-Driven Health Care," issued by the Centers for Studying Health Systems Change, a nonpartisan research group based in Washington, D.C., CDH plans could negatively impact outcomes by limiting the ability of patients with chronic conditions to secure preventive care. In addition, some health care advocates have significant concerns over selection issues. It is believed that healthier members will choose the CDH plan, leaving the more costly, sicker members in the insured plan.A survey conducted with employers by The Centers for Studying Health System Change reported that the majority of employees—more than 70 percent—had health care costs of less than $1,000 a year. Therefore, employers were concerned that by providing a $1,000 spending account, workers would spend more, thus increasing their total costs. Another recent employer survey reported that nearly one-third of the workforce secured health care coverage through a spouse; therefore offering coverage to those employees could increase costs without adding real value to the plan member and with the potential to waste the dollars of the plan sponsor.
Implementation of CDH plans can also be more expensive for the plan sponsor. Depending on the plan sponsor's existing capabilities, a significant investment (capital or outsourced) may be required in terms of increased customer services, systems integration, investment in interactive voice response (IVR) systems, online technology, as well as educational materials. While the vendor may offer these services, the plan sponsor will have to pay for them one way or another.
CDH plans must also provide comprehensive, rapid, and easy-to-access account information for employees and plan members. It is important for members to know what they have spent and how much remains for pharmacy coverage, inclusive of fees and discounts, so they do not spend in excess of the funds they have available.
In addition, it must be recognized that some plan members may not be ready to assume responsibility for health care purchase decisions. Without proper guidance, education, communication, and support, some might be tempted to discontinue their medications or make unwise decisions. This could lead to poorer outcomes requiring more expensive medical care, such as surgery or hospitalization.
Unfortunately, there is minimal data to help consultants and plan sponsors understand the implications of CDH. Preliminary results from a University of Minnesota study comparing the health care utilization and costs of CDH enrollees to traditional plan enrollees indicate that patient expenses, including pharmaceutical costs, were similar for each population. However, CDH enrollees showed an increase in demand for services. In fact, 65 percent of CDH enrollees were more likely to call customer service compared with 40 percent in the traditional plan.
While there are uncertainties surrounding this model, there are also some potentially positive attributes of such plans. CDH plans designed, managed, and implemented by experienced managed care organizations appear to have a better chance of addressing areas of concern while meeting the needs of employers and employees. Some of the benefits of CDH plans that should be considered by employers include:
  • Plan members with a deductible benefit design will appreciate first-dollar coverage and the ability to obtain some level of coverage for all drugs including those that are nonformulary. However, as plan members bear the full cost of their prescription drugs, and as they become accustomed to discussing drug pricing and alternative therapies with their providers, the rate of generic substitution will likely increase.
  • The tax savings achieved through CDH can be significant for employers. For every $1,000 deposited into a CDH account, the employer will save 7.65 percent, or $76.50 in payroll taxes.[8] Furthermore, if CDH enrollees become more savvy health care consumers, plan sponsors can also expect to save in terms of lower claims costs and, ultimately, lower health care premiums.
The movement towards consumer-directed health care is part of a bigger picture in which individuals have more responsibility for their overall financial and physical health. However, until more data is available, employers will need to fully explore the pros and cons of CDH plans, and ensure they have examined other pharmacy benefit strategies proven to help lower outcomes and improve quality.

Jan 20, 2012

Why Plan Sponsors Are Considering Alternative Prescription Drug Plans

In 2004, the nation's spending on prescription drugs was more than $200 billion. While this represents one of the largest segments of health care spending today, the good news is that pharmacy costs are moderating; growth in 2003 was 12.4 percent versus 19.7 percent in 1999. However, despite moderation, pharmacy costs continue to represent a significant portion of an employer's benefits expenditures.
Pharmaceutical manufacturers are often blamed for the high cost of prescription benefits. In reality, there is a complex array of factors influencing pricing that must be examined to find effective and meaningful solutions for employers and payers. Factors currently influencing price include:
  • Federal and state legislation;
  • Consumer trends within the marketplace;
  • Increasing utilization caused by an aging population; and
  • Growing demand as a result of society's fixation on prescription drugs as a cure for all ills.
To manage costs more effectively, payers are looking for solutions, and are often willing to try any option that appears to promise lower costs. Many of the newer drug benefit design options share a common theme; they place more responsibility and financial burden on the employee as a primary strategy to reduce costs to the employer.
However, employers cannot continue to shift costs to members as the sole tactic to reduce health benefit expenses. The industry must find ways to encourage employers to move beyond the latest benefit design trend to focus on strategies with the proven ability to manage costs and improve quality. These approaches will ensure that employers' pharmacy benefit management (PBM) programs are "customized" to better meet the demands of plan members and plan sponsors.

Jan 16, 2012

Plan Administration | Dental Plan

The last item to be addressed is claims administration. The nature of dentistry and dental plan design suggests that claims administration is very important. While several years may lapse before an insured has occasion to file a medical claim, rarely does the year pass during which a family will not visit the dentist at least once. Therefore, claims administration capability is an extremely important consideration in selecting a plan carrier—and might very well be the most important consideration.
One key element of claims administration is "predetermination of benefits." This common plan feature requires the dentist to prepare a treatment plan that shows the work and cost before any services begin. This treatment plan generally is required only for nonemergency services and only if the cost is expected to exceed some specified level, such as $300. The carrier processes this information to determine exactly how much the dental plan will pay. Also, selected claims are referred to the carrier's dental consultants to assess the appropriateness of the recommended treatment. If there are any questions, the dental consultant discusses the treatment plan with the dentist prior to performing the services.
Predetermination is very important both in promoting better quality care and in reducing costs. These benefits are accomplished by spotting unnecessary expenses, treatments that cannot be expected to last, instances of coverage duplication, and charges higher than usual and customary before extensive and expensive work begins. Predetermination of benefits can be effective in reducing claim costs by as much as 5 percent. Predetermination also advises the covered individual of the exact amount of reimbursement under the plan prior to commencement of treatment.
Also important are alternate treatment provisions. These provisions enable the plan administrator either to approve the least costly, equally effective treatment option or to cover more expensive procedures only at the level of the less expensive alternative. Alternate treatment provisions, adopted by most plan sponsors, can reduce plan costs up to 5 percent.

Jan 13, 2012

Sponsor's Approach to Implementation | Dental Plan

The last of the factors affecting plan costs is the sponsor's approach to implementation. Dental work, unlike medical care, lends itself to "sand-bagging" (i.e., deferral of needed treatment until after the plan's effective date). Everything else being equal, plans announced well in advance of the effective date tend to have poorer first-year experience than plans announced only shortly before the effective date. Advance knowledge of the deferred effective date easily can increase first-year costs from 10 percent to 20 percent or even more.
Employee contributions are another consideration. Dental plans, if offered on a contributory basis, may be prone to adverse selection. While there is evidence that the adverse selection is not as great as was once anticipated, many insurers continue to discourage contributory plans. Most insurance companies will underwrite dental benefits on a contributory basis, but some require certain adverse selection safeguards. Typical safeguards include the following:
  • Combining dental plan participation and contributions with medical plan participation.
  • Limiting enrollment to a single offering, thus preventing subsequent sign-ups or dropouts.
  • Requiring dental examinations before joining the plan and limiting or excluding treatment for conditions identified in the exam. The Health Insurance Portability and Accountability Act (HIPAA) limitations do not apply as long as the dental benefits are "limited in scope" and are available under a separate policy or rider.
  • Requiring participants to remain in the plan for a specified minimum time period before being eligible to drop coverage.

Jan 10, 2012

Characteristics of the Covered Group

A second factor affecting the cost of the dental plan is the characteristics of the covered group. Important considerations include, but are not limited to, the following:
  • Age.
  • Gender.
  • Location.
  • Income level of the participants.
  • Occupation.
The increased incidence of high-cost dental procedures at older ages generally makes coverage of older groups more expensive. Average charges usually increase from about age 30. As one ages, the need for more expensive restorative services increases for those who need dental care.
Gender is another consideration. Women tend to have higher utilization rates than men. For a given age, costs among females are 10–15 percent higher than the costs among males. One study showed that women average 1.9 visits to dentists per year, compared with 1.7 for men. These differences may be attributable to a heightened sensitivity to personal appearance by women rather than to a higher need.
Charge levels, practice patterns, and the availability of dentists vary considerably by locale. Charge levels within the United States range anywhere from 75 percent to 135 percent of the national average, except for Alaska, California, and certain metropolitan areas. Differences exist in the frequency of use for certain procedures as well. There is evidence, for example, that more expensive procedures are performed relatively more often in Los Angeles than, say, in Philadelphia.
Another consideration is income. One study shows that dental care expenditures per participant were 5 percent to 30 percent higher for members of families with higher incomes. Generally, the higher the income, the greater the difference.
Essentially four reasons may account for income being a key factor. First, the higher the income level, the greater the likelihood the individual already has an established program of dental hygiene. Second, in many areas there is greater accessibility to dental care in high-income neighborhoods. Third, a greater tendency exists on the part of higher-income individuals to elect higher-cost procedures. Last, high-income people tend to use more expensive dentists.
Another important consideration is the occupation of the covered group. While difficult to explain, evidence suggests considerable variation between plans covering blue-collar workers and plans covering salaried or mixed groups. One possible explanation is differences in awareness and income levels. One insurer estimates that blue-collar employees are 15 percent to 25 percent less expensive to insure than white-collar employees.
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