Dental Insurance in California: C A L I FOR N I A H EALTH C ARE Scope, Structure, and Availability F OU NDATION Introduction other words, dental insurance enables people of Like health insurance, dental insurance matters. different socioeconomic backgrounds to obtain Dental coverage directly affects a person’s ability dental services. However, this enabling effect may to obtain care because it reduces or removes vary for people with different socioeconomic Issue Brief financial barriers to services. However, unlike backgrounds. health insurance, there is a much smaller risk of catastrophic financial loss in the absence of Those without dental insurance coverage bear dental insurance. This may be the primary reason the entire cost of their dental services. Paying for for differences in coverage and scope of benefits dental care must compete with health care, food, between dental and health insurance. rent, and other basic necessities, particularly for poor and disadvantaged people. In these contests, Dental insurance is structured similarly to health dental care often loses. insurance but often is more limited in scope and availability. People without dental insurance Private and Public Dental Insurance typically seek dental care less often and may suffer Individuals can obtain dental insurance through poor dental health as a consequence. benefits offered by their employers, purchase it privately, or qualify for public programs. Rate of This issue brief examines the basic structure coverage, cost-sharing, and scope of dental benefits of dental insurance to illustrate how it enables vary with each type of coverage. Californians’ access to dental care. Employment-based Dental Insurance Coverage Overview Among Californians with dental insurance The extent of dental insurance coverage in the coverage, the great majority (78 percent) have United States is substantially lower than that for employment-based coverage.4 health insurance. Nationally, 35 percent of the U.S. population has no dental coverage, compared Approximately 68 percent of California firms offer with 15 percent without health insurance.1 In health insurance to their employees, but only 34 California, 39 percent of the population has no percent also offer dental benefits (see Figure 1 on dental coverage; 13 percent is without health page 2).5 Larger employers are more likely to offer insurance.2 dental benefits. The highest offer rates are among firms with 1,000 or more employees. Lack of dental insurance is associated with lower likelihood of a dental visit in a given year, regardless of income, race and ethnicity, S eptember employment, education level, and gender.3 In 2009 People who are offered dental insurance tend to accept it. Figure 2. Dental Insurance Coverage by Offer and Acceptance of Health Insurance, California, 2007 Although data on acceptance rates of employer-sponsored dental insurance are not available, data are available on 10% Not Offered Health health insurance acceptance rates. Dental benefits are 36% Insurance 5% rarely offered independently of health benefits. Therefore, 10% Not Eligible for offer and acceptance rates of health benefits among people Health Insurance with and without dental insurance may indicate patterns 75% Offered and in dental insurance acceptance rates. 15% Did Not Accept Health Insurance Figure 1: Health and Dental Benefit Offer Rates Among 10% California Private Employers, 2008 Offered and 40% Accepted Health Offer Health and Dental Benefits Offer Health Benefits Only Insurance 99% 100% 100% 95% 7% 10% 19% 93% 82% 89% Does Not Have Has Dental 80% Dental Insurance 36% Insurance 68% 76% Source: Author’s analysis of 2007 California Health Interview Survey Note: Figure totals reflect rounding to the nearest percent. 60% 33% 56% 37% Privately Purchased Dental Insurance 40% 46% An estimated 5 percent of Californians have privately purchased dental insurance.7 These are primarily people 34% whose employers do not offer dental benefits and who 20% do not qualify for public programs, most likely due to 19% exceeding income eligibility requirements. Individual policies may vary greatly in their scope of benefits and 0 Total 3-9 10-49 50-199 200-999 1,000 restrictions. Employees Employees Employees Employees or more Employees Public Dental Insurance Source: Author’s analysis of 2008 California Employer Benefit Survey Note: Figure totals reflect rounding to the nearest percent. As of 2007, about 17 percent of Californians were insured through public programs, some of which extend dental benefits to low-income people.8 Those eligible for Most people offered health insurance accept coverage. these programs include low-income workers who are not Many people with dental insurance were also offered offered health and dental benefits, self-employed people, employer-sponsored health benefits (75 percent). But the unemployed, and those not in the labor market. fewer individuals without dental insurance were offered health coverage (40 percent) (Figure 2).6 The vast majority of publicly insured adults in California receive dental coverage through Denti-Cal, which is available to low-income adults receiving full-scope benefits through Medi-Cal. The program does not require 2  |  California HealthCare Foundation significant copayments and providers have the option of only 4 percent of Denti-Cal recipients are enrolled in forgoing copayments.9 DHMOs.15 The budget crisis in California has led to the elimination of The small market share of DHMOs compared with adult dental benefits in Medicaid, with a few exceptions. other dental plans is partly due to the structure of these plans. DHMOs provide dental benefits on a capitation In the absence of such public coverage, low-income basis using a contracted provider network. Some uninsured Californians can access county-level dental DHMOs may allow consumers to use non-network services under the safety-net system. But such programs providers on a fee-for-service basis. DHMOs rely on often provide urgent and sporadic care for acute primary care dentists to perform gatekeeper functions, conditions rather than full dental insurance coverage.10 including referrals to specialists. Some DHMOs may allow self-referrals, though the primary care dentist may Other public forms of adult dental coverage include: be ultimately responsible if such referrals are deemed Tricare for military personnel and their families; Veterans unnecessary. Affairs for veterans and their dependents; and Indian Health Services for federally recognized American Indians DHMO participants can face both limitations in their living on reservations. These programs constitute a very choice of dental providers and significant levels of small share of the publicly insured market. utilization review when accessing dental services. While DHMOs have lower levels of cost-sharing compared Among retirees and those age 65 and older, Medicare does with other dental plan types, they pay on a capitation not provide dental benefits outside of specific services basis, which may lead to lower provider participation. such as jaw reconstruction after an accident, extractions Data from a 2003 survey of California dentists in private prior to radiation treatment, or oral examination prior practice confirmed that just 5 percent of their gross to kidney transplantation or heart valve replacement.11 practice income was from DHMOs, in contrast with However, Medicare Advantage (Medicare HMO) plans 55 percent from non-HMO private dental insurance.16 do offer dental benefits to approximately 33 percent of Employers generally perceive DHMOs as limiting the participants.12 choice and quality of available dentists and most often offer them as one option among other types of plans.17 Types of Dental Insurance Dental insurance plans, much like health insurance Dental PPOs plans, can be divided into HMOs, PPOs, and traditional Dental PPOs (DPPOs) have increased their market indemnity plans. Discount/referral plans and direct share since 2000.18 Nationally, approximately 63 percent reimbursement plans also have a presence in this market. of dental subscribers were enrolled in dental PPO plans as of 2007. California has the largest number of Dental HMOs DPPO participants in the United States: an estimated Dental HMO (DHMO) plans have a smaller market 12.4 million, or 34 percent of the state’s population.19 share in California than HMOs. Approximately 50 This comparatively large share of the market is partly percent of Californians are enrolled in HMOs,13 attributed to PPO features such as payment method, while only about 10 percent are enrolled in DHMOs. provider network size, and amount of utilization review. California leads other states with an estimated 3.5 Employers may choose DPPOs to reduce costs while million people enrolled in DHMOs.14 Forty-two percent offering benefit and provider access levels similar to of Medi-Cal recipients are enrolled in HMOs while indemnity plans. Dental Insurance in California: Scope, Structure, and Availability  |  3 employment-based health saving accounts without a health plan feature. These self-funded programs reimburse The more popular PPO dental plans utilize large participants for a percentage of their dental care networks of preferred providers who agree to discounted expenditures and do not impose any restrictions on the reimbursement amounts. Although some utilization choice of providers. review may be required of these providers, it tends to be more limited than that of DHMOs. Utilization Dental Insurance Premiums and review within dental PPOs may include retrospective Effect on Plan Acceptance review of provider billing and practice patterns as well as Premiums vary by plan type. Among the most prevalent pre-authorization for some major services. plans in the group market, DHMOs have the lowest annual premiums nationally and indemnity plans have Dental Indemnity, Discount, the highest (Figure 3). Lower-premium plans that exclude and Direct Reimbursement Plans services such as orthodontia can cost as little as $183 for Other types of plans in the national dental insurance DHMOs and $350 for indemnity plans for employee- market include indemnity, discount, and direct only plans. Estimated annual premiums for discount reimbursement plans. plans, more common in the individual market, range from $132 for an individual to $300 for a family. Dental indemnity plans have 17 percent of the market share. In California, 7.3 percent of the population In employment-based plans, the employee may pay the is insured under this type of plan.20 These plans pay entire premium, some of it, or none of it. Contribution providers on a fee-for-service basis without any discounts rates vary by type of plan. For example, 26 percent of or contractual arrangements. Nationally, dental indemnity DHMO participants pay the entire premium, followed plans may also include some level of utilization review by 14 percent of DPPO participants, 16 percent of dental and restrictions on choice of providers. In general, they indemnity participants, and 10 percent of discount plan are a slowly declining presence.21 participants.24 Dental discount plans (also called referral plans) have There is a direct correlation between employer premium about 10 percent of the market share nationally22 and contribution and employee acceptance of dental benefits. 0.3 percent in California. Dental discount plans are more When employers pay the entire premium, over 90 percent prevalent in the individual market than other types of of employees participate. When employers pay part of the plans. Nineteen percent of discount plan participants are premium, 70 percent of employees participate.25 covered by individual policies. In contrast, 3 percent of DHMOs and 1 percent of DPPOs and dental indemnity participants are covered by individual policies.23 A dental discount plan is a non-insured arrangement in which a panel of providers agrees to discounted fees directly paid by participants. Discount plans do not contribute to the cost of services. Direct reimbursement plans have 1 percent of the national market share. They function similarly to 4  |  California HealthCare Foundation Figure 3. Annual Premium Amounts for Plans levels are applied. Services such as fillings and extractions with Orthodontia Benefits in Private Group Market, by Type of Plan have lower deductibles and cost-sharing amounts, while major services such as crowns and root canals $1,374 require higher deductibles and contributions. Among Employee Only Employee and Family employment-based plans, the most common deductibles are $50 and 20 percent cost-sharing for basic services. $1,041 For major services, the same deductibles and 50 percent cost-sharing are most common.28 When orthodontic services are available to adults, they are covered at higher cost-sharing levels and sometimes as a flat amount regardless of overall costs. $572 Many dental plans have an annual cap for covered $406 services, at which point the plan stops contributing to $321 the cost of services until the next enrollment year. Of $186 the plans: n DHMOs do not have a cap; DHMO DPPO Indemity n The majority of indemnity (65 percent) and PPO Source: 2007 NADP Dental Benefits Report: Premium Trends. (57 percent) plans have a cap with a national median of $1,000 to $1,500. Caps of $1,500 to 1,999 are less common; only 21 percent of Scope of Benefits and Cost-Sharing indemnity and 30 percent of PPO plans apply Dental benefits are generally divided into three types: these caps. Small percentages have higher annual preventive/diagnostic (e.g., cleaning, routine dental caps;29 and exams); basic care and procedures (e.g., fillings, n Denti-Cal’s annual cap is $1,800.30 extractions); and major dental care (e.g., root canals, crowns).26 Orthodontia, cosmetic, and implants are other Restrictions on utilization, such as waiting times before categories of services. Dental implants and cosmetic care covering services, are less common in employment-based are generally excluded from benefits. The bulk of dental plans and not applicable to public dental coverage. Other services delivered are low-cost, such as routine dental limitations and exclusions may include time limitations exams.27 on crowns and bridges and congenital conditions. However, the level of benefits may increase after the first Cost-sharing for dental health benefits in the private year and subsequent years of maintaining the policy as a market is structured similarly to general health benefits, reward to policyholders. with tiered deductibles and cost-sharing depending on the type of service. However, the scope of covered benefits and out-of-pocket expenditures differ considerably from plan to plan. DHMOs do not include deductibles and have low co-pays. PPOs and indemnity plans cover preventive care without applying deductibles. Beyond preventive services, tiered deductibles and cost-sharing Dental Insurance in California: Scope, Structure, and Availability  |  5 Summary and Conclusions The trend toward increased market share of dental PPO Although dental insurance is structured similarly to plans in the private market can potentially shift a greater health insurance, it is often more limited in scope and share of dental expenditures to the insured population. availability, primarily because many employers do not While PPO plans may offer a greater choice of providers, offer dental benefits. Consequently, dental insurance plays the higher level of cost-sharing is very likely to increase a more limited role in dental service utilization. disparities in service utilization between those of lower socioeconomic status and the better-off. Unlike health insurance, PPOs and indemnity plans dominate the private dental insurance market. Dental Likewise, new plan designs, such as low-premium, insurance plans may employ utilization review and high-deductible dental plans, have the potential to further management in HMO, PPO, and indemnity plans. In foster disparities, since they may appeal to lower-income the public market, extensive authorization requirements populations. Yet high deductibles can lead to further are also employed to control service utilization. delays of less urgent basic services, allowing problems such as cavities to escalate into more serious conditions Coverage limitations and variable levels of cost-sharing that require more expensive procedures, such as crowns may lead to significant out-of-pocket expenditures for and root canals. people with dental insurance. The level of out-of-pocket expenditures for each individual corresponds to the level of need for dental care, actual dental care use, and ability to pay for costs that are not covered by dental policies. About the Author Economic downturns threaten dental insurance coverage Nadereh Pourat, Ph.D. rates as employers seek cost-saving measures. Although UCLA Center for Health Policy Research the number of employers that offer dental benefits has remained relatively stable since 2003,31 these numbers may change as the economic climate worsens. About the F o u n d at i o n The California HealthCare Foundation is an independent Small firms have lower offer rates than large firms because philanthropy committed to improving the way health small firms often have lower financial reserves and are care is delivered and financed in California. By promoting more likely to reduce benefits to save costs. In California, innovations in care and broader access to information, our small firms are frequently concentrated within the retail goal is to ensure that all Californians can get the care they and service industries and employ a larger share of lower- need, when they need it, at a price they can afford. For income people. Losses in dental benefits in this market more information about CHCF, visit www.chcf.org. have a disproportionate effect on vulnerable populations who do not have the financial means to purchase private dental insurance. Furthermore, those seeking private dental insurance do not have the negotiating power of an employer, which contributes to holding down the level of benefits offered. 6  |  California HealthCare Foundation Endnotes 20.Ibid. 21.Ibid. 1.Manski, R.J., and E. Brown. 2007. Dental Use, Expenses, Private Dental Coverage, and Changes, 1996 and 2004. Rockville, MD: 22.Ibid. Agency for Healthcare Research and Quality, MEPS Chartbook 23.Ibid. No. 17; U.S. Census Bureau. Insurance Highlights from: Income, 24.Ibid. Poverty and Health Insurance Coverage in the United States: 25.Witt, et al., A Look at the U.S. Group Dental Market. 2007. Current Population Reports, P60-235. Washington, D.C.; 2008. 26.Dentalinsurancehelper.com. “What Does a Typical Dental Insurance Plan Generally Cover?” (www.dentalinsurancehelper. 2.Based on author’s analysis of the California Employer com/dental-insurance-articles/independent-dental-coverage.htm). Health Benefits Survey, California HealthCare Foundation, December 2008. (www.chcf.org/documents/insurance/ 27.Witt, et al., A Look at the U.S. Group Dental Market. EmployerBenefitsSurvey08.pdf ). 28.Ibid. 3.Isong, U., and J.A. Weintraub. 2005. “Determinants of Dental 29.Ibid. Service Utilization Among 2- to 11-Year-Old California 30.Ibid. Children.” Journal of Public Health Dentistry 65(3):138-145. 31.Ibid. 4.Author’s analysis of 2007 California Health Interview Survey. 5.Based on author’s analysis of the 2008 California Employer Benefit Survey. 6.Author’s analysis of 2007 California Health Interview Survey. 7.California HealthCare Foundation. 2007. Denti-Cal Facts and Figures: A Look at California’s Medicaid Dental Program (www. chcf.org/documents/policy/DentiCalFactsAndFigures.pdf ). 8.Author’s analysis of 2007 California Health Interview Survey. 9.CHCF, Denti-Cal Facts and Figures. 10.CHCF. August 2006 (revised November 2006). Medically Indigent Service Program Profiles (www.chcf.org/documents/policy/ CountyPrgrmsMedicallyIndigentMISP.pdf ). 11.Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services. Medicare Dental Coverage: Overview (www.cms.hhs.gov/MedicareDentalCoverage). 12.Gregory, C., L.G. Pope, J. Kautter, B. Dulisse, A. Block, and N. West. October 2008. Medicare Advantage Plan Availability, Premiums and Benefits, and Beneficiary Enrollment in 2007, Final Report. Waltham, MA: RTI International. 13.Author’s analysis of 2007 California Health Interview Survey. 14.National Association of Dental Plans. Delta Dental Plans Association. August 2008. 2008 Joint Dental Benefits Report: Enrollment. 15.CHCF, Denti-Cal Facts and Figures; the only Denti-Cal HMO plan is in Sacramento; all others are Exclusive Provider Organizations. 16.Based on 2003 California Dental Survey, conducted by author. 17.Witt, J., T. Musco, and W. Weston. 2004. A Look at the U.S. Group Dental Market: Trends and Opportunities. Windsor, CT: LIMRA International. 18.National Association of Dental Plans, 2008 Joint Dental Benefits Report; Delta Dental Plans Association. September 2008. America’s Oral Health: A Market Report on Dental Benefits. 19.National Association of Dental Plans, 2008 Joint Dental Benefits Report. 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