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.