Types of Plans | Dental Plan Design

Combination Plans

This simply is a plan in which certain procedures are reimbursed on a scheduled basis, while others are reimbursed on a nonscheduled basis. In other words, it is a hybrid. While many variations exist, a common design in combination plans is to provide preventive and diagnostic coverage on a nonscheduled basis (i.e., a percentage of usual and customary, normally without a deductible). Procedures other than preventive and diagnostic are provided on a scheduled basis.

The principal advantage of a combination plan is that it provides a balance between (1) the need to emphasize preventive care, and (2) cost control. Procedures that traditionally are the most expensive are covered on a scheduled basis, and except where benefit levels are established by a collective bargaining agreement, the timing of schedule improvements is at the employer's discretion. Preventive and diagnostic expenses, however, adjust automatically, so the incentive for preventive care does not lose its effectiveness as dental care costs increase.

The combination approach shares many of the same disadvantages as the scheduled and unscheduled plans, at least for certain types of expenses. Benefit levels—for other than preventive and diagnostic expenses—must be evaluated periodically. Scheduled payments do not reimburse at uniform levels for geographically dispersed participants. And dentists may be influenced by the schedule allowances to adjust their charges. Also, actual plan payments for preventive and diagnostic expenses rarely are identified in advance. Finally, it can be said that the combination approach is more complex than either the scheduled or unscheduled alternatives.

Incentive Plans

This type, a second variation, promotes sound dental hygiene through increasing reimbursement levels. Incentive coinsurance provisions generally apply only to preventive and maintenance (i.e., minor restorative) procedures, with other procedures covered on either a scheduled or nonscheduled basis. Incentive plans are designed to encourage individuals to visit the dentist regularly, without the plan sponsor having to absorb the cost of any accumulated neglect. Such plans generally reimburse at one level during the first year, with coinsurance levels typically increasing from year to year only for those who obtained needed treatment in prior years. For example, the initial coinsurance level (i.e., the benefit paid by the plan) for preventive and maintenance expenses might be 60 percent, increasing to 70 percent, 80 percent and, finally, 90 percent on an annual basis as long as the individual visits the dentist regularly. If, in any one year, there is a failure to obtain the required level of care, the coinsurance percentage reverts back to its original level.

The incentive portion of an incentive plan may or may not be characterized by deductibles. When deductibles are included in these plans, it is not unusual for them to apply on a lifetime basis.

The incentive concept, on the one hand, has two major advantages. In theory, the design of the plan encourages regular dental care and reduces the incidence of more serious dental problems in the future. Also, these plans generally have lower first-year costs than most nonscheduled plans.

On the other hand, there are major disadvantages. First, an incentive plan can be complicated to explain and even more complicated to administer. Second, little evidence exists to suggest that the incentive approach is effective in promoting sound dental hygiene. Finally, this particular plan is vulnerable to misunderstanding. For example, what happens if the participant's dentist postpones the required treatment until the beginning of the next plan year?

Plans Providing Both Medical and Dental Coverage

The last of the variations is the plan that provides both medical and dental coverage. During the infancy of dental benefits, such plans were quite popular.

These plans generally are characterized by a common deductible amount that applies to the sum of both medical and dental expenses. Coinsurance levels may be identical, and sometimes the maximum applies to the combination of medical and dental expenses. However, recent design of these plans has made a distinction between dental and medical expenses so that each may have its own coinsurance provisions and maximums.

The advantages of this approach are the same as for the nonscheduled plan (i.e., uniform reimbursement levels, adjusts automatically to change, and relatively easy to understand). But this approach fails to recognize the difference between medicine and dentistry unless special provisions are made for dental benefits. It must be written with a medical carrier, whether or not this carrier is competent to handle both medical and dental protection; it makes it extremely difficult to separate and evaluate dental experience; and it shares the same disadvantages as the nonscheduled approach.