Taking a bite out of profits: Dentists are no longer offering insurers deep discounts in exchange for patients, so carriers must devise new ways to compete for employers' business. (Briefing).

Negotiating discounts with dentists used to be the way dental insurers could provide value to clients, but that's not the case anymore.

Instead, successful carriers have to address some new realities in the dental marketplace that stem mostly from the fact the number of dentists has been declining, said Alan Vogel, doctor of medical dentistry and national dental director for MetLife Dental. Vogel said insurers today have to compete for doctors on the basis of the information and service they can provide. Then, they must compete for employer clients by customizing plan design--both coverage and benefits--especially as employees are being asked to pick up more of the costs.

In the l980s, a perceived oversupply of dentists meant dental plans delivered patients in exchange for discounts. The plans also held down costs by capping annual benefits and frequency of procedures for which they would pay. "Plans were never set up to provide the care patients might actually need," Vogel said. "They just told dentists, 'Give us 20% off, and we'll send people to you.'"

Dentists have more leverage now, and trading patient bases for discounts might no longer make sense. Vogel said about 4,000 new dentists graduate each year in the United States, while about 6,000 retire. Rural areas are particularly underserved by dentists, since most build practices in populated areas, he said.

MetLife Dental, a subsidiary of New York-based MetLife Inc., maintains its discounts with providers by providing information dentists need through e-commerce applications. MetLife can tell a dentist whether a patient still is employed and covered by its plan at the time the patient comes through the door. It also can tell a practitioner what benefits are remaining for the year in the plan, so the doctor can advise the patient before treatment what is and isn't covered and how much the patient will have to pay. Vogel said the information also helps the patient consider postponement of elective treatment until coverage is available.

Dentists are more willing to work with an organization that provides them immediate information so they can know whether a service is covered, whether a patient is likely to become a bad debt and how much they will be paid for the service by an insurer, said Vogel. Lastly, MetLife Dental can help a dentist hand bills to patients as they leave the office, thus saving on administrative and mailing expenses.

Patients also might want to know what their plans cover, the status of their claims, who is in their dental networks and even how to get to their dentists' offices.

Vogel said he also handles a lot of clinical issues. "My job is to look at services being rendered and make recommendations to employer groups about adding services," he said. "I try to help them understand the newer techniques and which to include in their plans." Implants, for example, often are excluded from plans, but they are increasingly common. Dental plans might also bring more of a managed-care approach to their business in the future by identifying risk factors to dental care in hopes of setting up models to evaluate and avoid incidents of disease.

Competing For Health Dollars

Dental plans face competition for employer dollars from health-care plans, which employers and employees consider a higher priority. As health-care costs rise, fewer dollars will be available for dental plans, Vogel said. Dental costs also are climbing, Vogel said, with dental inflation at about 6% in the past year, two or three times the rate of growth in the consumer price index.

These factors are forcing employees to pay more of their own money for coverage. These higher costs come at a time when more Americans are interested in cosmetic treatments, which are not covered by most plans. Insurers, meanwhile, face a "balancing act," said Vogel.

"If employees are paying more, and we say we won't cover service they need, they won't keep us," he said. "If we can't control the costs, costs would skyrocket. Most people want preventive and diagnostic coverage, but if we also cover the more exotic and costly services that fewer people need, everybody has to chip in and pay." About half of Americans currently have some form of dental coverage, a proportion that has increased in the past 20 years, he said.

Over that period, Americans have redefined what oral health means. "It used to be your oral health was good if your teeth didn't hurt," said Vogel. "Now it's redefined that they have to also look good."

As a result of regular and better care, a dramatically lower percentage of people in the past 20 years have lost their teeth. That means the huge numbers of baby boomers moving into their 60s in the years ahead will further tax the ability of the private system to provide dental care. "Everything favors the dentist," said Vogel.

Exacerbating the problem for baby boomers is that when they retire, many will lose whatever dental benefits they had, and Medicare has never covered dental work. "That was shortsighted," said Vogel. "When you think about it, the elderly missing teeth become recluses, and dentures are expensive for people on a fixed income. Right now, the government is considering a drug benefit, so the feeling is that it will be very difficult to add dental benefits to Medicare."

MetLife Dental maintains dental plans for employers of all sizes. Its main competitors for large national accounts (more than 10,000 employees) are the dental plans of Cigna and Aetna. In the small-case markets (less than 1,000 employees), competitors include Guardian, Fortis and Ameritas.

MetLife administers dental benefits to about 18 million Americans at companies of all sizes. It has provided dental insurance since 1962. The MetLife Preferred Dentist Program, created in 1985, is the largest commercial dental preferred provider organization in the United States, according to Vogel.

[Graph omitted]

Number of Dentists in the United States, 1959-2000

Dental insurers have had to cope with a declining number of
professionally active dentists during much of the 1990s.

      Number of      Professionally
Year  Dentists           Active (*)

2000                    154,459
1999                    153,228
1998   183,000          149,350
1997   181,181          150,074
1996   182,234          152,205
1995   182,306          153,346
1994                    153,030
1993                    151,390
1991   174,777 (**)     150,762 (**)
1990                    140,543
1989                    139,875
1988                    140,297
1987   157,579          137,817
1986                    135,595
1985                    133,594
1984                    131,475
1983                    129,248
1982   142,688          126,985
1979   137,826          117,223
1978                    117,044
1976   130,992          111,178
1972   123,349          105,500
1970   120,916          102,500
1969   118,975          101,000
1968   116,964           66,200
1965   112,455           64,000
1964   110,999           63,000
1963   109,382           95,500
1962   107,995           95,000
1961   106,796           94,000
1960   105,140           93,000
1959   103,581           92,500

(*)The number of professionally active dentists is projected by using
models in years in which no total number of dentists appears. The number
of professionally active dentists is estimated 1959-1972.

(**)Improved data collection yielded an increase.

Source: American Dental Association