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Published on : March 03, 2012

Bundling: Balancing Budgets and Benefits

Bundling: Balancing Budgets and Benefits

Finding the best benefit plans for employers can be challenging. Although medical insurance is the primary focus for benefit packages, employees also value other ancillary options, such as dental insurance. For many employers, economic challenges and projected increases in healthcare costs have stretched their budgets. This situation has led to increased interest in benefit plan options that provide added value and financial savings.

Although many medical carriers are offering discounts for bundling lines of coverage, this option may lead to problems down the road. Before signing this type of agreement, producers need to evaluate the products and costs. While a bundled plan may look good on the surface, it could lack the specific benefits employees want and the anticipated savings. A good strategy to consider is placing your ancillary business, such as dental, with a carrier that specializes in that specific line of coverage. When discussing benefit solutions with employers, it is a wise idea to look at all the pros and cons before placing ancillary dental coverage with their medical carrier.

Are Those Discounts Real Savings?

Medical carriers frequently tout the cost savings employers will enjoy by working with one carrier for two or more products. But remember Ben Franklin’s famous saying, “The bitterness of poor quality remains long after the sweetness of low price is forgotten.”

Some medical carriers offer a flat discount to employers that agree to add in an ancillary dental plan. While the advertised price may be attractive, producers should carefully evaluate these factors:

  • Quality of the plan
  • Carrier’s pricing history and persistency
  • Schedule for when discounts may expire

Some carriers may increase the price of the dental insurance to help offset the discount given for medical insurance. Others may offer a discount on the medical-dental combination for one year, but then at renewal time hit employers with a substantial rate increase that enables the carrier to recover its losses.

It may seem easier to worry about potential problems at a later date – take the discount offered this year and deal with potential price increases next year. But isn’t it more efficient to study all of the options and possible repercussions of decisions up front? Working with a carrier that has the expertise to price dental accurately from the start will help prevent unwelcome surprises at renewal. Clients value an adviser who understands and cares about their long-term best interests.

Dental Experience Matters

Because of high plan utilization, processing dental claims can be challenging. Medical carriers inexperienced in offering dental may encounter significant problems and unforeseen expenses.  Inexperienced carriers may choose to subcontract the work to dental carriers in order to provide efficient claims processing services. But this decision may add another layer of administrative costs.

Before placing dental benefits with a medical carrier, consider whether all the claims – medical, dental, life and disability – will go through the same claims processing system. Single-system claims processing may increase the occurrence of errors and ultimately lead to unhappy members. Dedicated dental carriers have processing systems designed to handle dental claims specifically, resulting in more efficient and accurate payments.

Hidden Costs of Unbundling

Before even considering a combined medical-dental plan, producers should evaluate the potential pitfalls and costs of having to unbundle the plan later. If an employer experiences problems with one of the plans and needs to find a different carrier for one benefit, what are the hidden costs of changing plans? Will the carrier continue the discounted price for the product the employer retains? If not, the producer may need to research and evaluate new plans and new carriers for all lines of coverage. There are advantages to giving employers the best product available in each separate line of coverage from the start.

Know the Network

As you compare dental networks, don’t just analyze access to participating providers, but also the negotiated discount. Discounts will range from zero to 5 percent at the low end for some networks, or up to 25 to 30 percent for others.

The efficiency of the carrier’s payment schedule is vital for dental offices wanting to maintain smooth business operations. Typically, providers are more willing to negotiate a better discount with dental carriers than with medical carriers, because dental carriers are usually able to process claims and pay dental offices more quickly for patient care.

Don’t forget to evaluate the dental network’s claims processing schedule, discounted rates, access points and panel turnover statistics.

Understand Plan Variations

Dental plans vary between insurance carriers. Look at:

  • Restrictions or prerequisites – How long members must wait before receiving benefits
  • Limitations – Some plans have exclusions and conditions for coverage options

These details are often listed in the proposal’s fine print, so employers and employees may not be aware of them until coverage is denied.

Designing a plan that fits a group’s needs should be an important focus for the carrier. Insurance carriers that specialize in dental coverage have greater expertise and flexibility in customizing plan designs with a range of options and pricing to meet specific needs of the employee group.

Finding the Right Plan

Balancing benefit budget requirements and plan design needs is often challenging. The right carrier will help. When deciding whether or not to recommend a combined medical/dental plan, focus on these criteria:

  • Value of dental insurance to employers
  • Differences between dental and medical coverage
  • Distinctions and philosophy of the insurance carriers
  • Variations in plan design

You will find that experienced dental carriers offer many advantageous services, including quality plans with high-value dental coverage that employers and employees can count on.

About The Author

Todd Whitehill is a group sales representative in Southern California for Ameritas Group, a division of Ameritas Life Insurance Corp. (a UNIFI company). With headquarters in Lincoln, Neb. Ameritas Group is a leading provider of dental and vision products and added hearing care to its product portfolio in 2008.