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Dental Insurance Contract Strategies

Escaping Dental PPO Contracts Pt 4: Your Options and Strategy Depend on Your Patient’s Plans

If you haven’t read the previous articles in this series, you should probably start from the beginning. Dental insurance gets very complex very quickly, and it will be helpful to have some context.

Part 1: Is it a Good Idea to Leave PPO Networks?

Part 2: Self-Funded Plans vs Fully Insured Plans

Part 3: What Are Leased PPO Networks?

Time for a quick recap.

Dental practices all over the country are struggling due to low reimbursement fees

According to a recent survey by the ADA’s Health Policy Institute, low reimbursements from insurance companies are one of the top challenges dental practices currently face. In fact, 39.1% of respondents cited insurance or Medicaid issues/low reimbursements as their biggest challenge. Low reimbursement rates are not a new problem, and they certainly aren’t an unfamiliar one.

Understandably, many practice owners are tired of the insurance industry’s involvement both in their businesses, and in decisions about the quality of care they provide to their patients. You might feel the same, and you might also be aware that many benefits plans will cover Out-Of-Network (OON) care at higher rates than the discounted fees In-Network (IN) providers are contracted to accept.

But it’s not as simple as just choosing not to re-credential a couple contracts, or leaving a handful of networks and suddenly adding hundreds of thousands of dollars to your annual revenue. According to the ADA, among dentists who participate in any PPO networks, on average, participate in 28.3 different networks (whether they realize it or not).

The insurance industry is deeply entrenched in the majority of dental practices in America. Practice owners have to become more educated about how different plans work, how and why they pay differently, how insurance networks are linked together via provider leasing agreements, and what plans their patients are bringing to their office specifically. 

Oh, and I almost forgot about setting your UCRs appropriately in order to maximize your reimbursements without surprising your patients with out-of-pocket expenses they don’t expect. 

I’ll say it again, it gets complex quickly. 

how are Fully insured and Self-funded plans different in how they reimburse you?

Fully insured plans are what you would ideally want all of your patients to have (if they’re going to have dental benefits at all). Fully insured plans are purchased by employers directly from benefits carriers. The benefits carriers are directly responsible for paying out claims to providers. Payers collect premiums from employers and employees, and pay benefits out of those premiums. Annual maximums are set so that payers won’t be financially liable for more than the total they receive in premiums. 

The really important part for your practice is that fully insured plans fall under the jurisdiction of the state insurance commissioner for whichever state the plan was originally sold in. Being subject to state insurance commissioners means that fully insured plans have to comply with prompt payment laws. 

49 states have prompt payment rules requiring insurers to pay or deny claims within a certain time frame, usually 30, 45, or 90 days. 

In contrast , self-funded plans are provided to employees by employers, who are 100% for paying claims. Third-party administrators may collect premiums and handle the claims filing process, or the employer may run their own benefits program in house (usually larger companies like Walmart). 

Employers deposit a set amount of funds into an account at regular intervals. Benefits are paid from these funds.  If claims processed are more than the amount of funds available in the account, additional claims cannot be paid out until the employer adds more funds. 

Here’s the kicker. Self-funded plans fall under ERISA (the Employee Retirement Income Security Act of 1974), and not state prompt-payment laws.

ERISA states a claim must be processed/paid within a reasonable amount of time, usually 45 days. That is, unless there are no funds to issue payment. That means that the administrators of a given plan can have the ability to delay payments simply by not adding funds to the employee’s account. 

Self-funded plans also generally have lower Maximum Allowable Charges (MACs) than do fully insured. This isn’t always the case, as again some larger corporations actually offer very well paying plans because they have the capital to do so. But because employers are liable for paying all benefits claims, and because the funds to do so are finite, setting lower MACs essentially helps lower their financial liability.

We typically see these MACs set at a low to low-average in-network fee schedule offered by the carrier they are using as a TPA, which would indicate those carriers are providing those numbers to those corporations.  It’s a win-win for the Insurance company when they market to you.  “If you want to see ABC Conglomerate patients, join our network because they have our benefits.”  What they don’t tell you is how the TPA is contractually arranged.

Network Leasing Agreements: Insurance Companies Rent In-Network Providers to Each Other

Network leasing is a way for PPOs to offer more care access points to their subscribers, thereby increasing their marketable value to employers or individuals looking for new benefits plans. 

One PPO can “lease” their network of dental providers to another, so the dentists in-network with the first PPO must accept patients from the second as in-network, even though they might not have a direct contract with those patients’ plans.

In other words, insurance companies rent providers to other insurance companies, so that the patients of one can go to the providers of another without paying out-of-network fees, saving premiums (corporate profits) for the insurance companies.

Not only do almost all major dental benefits companies (with the notable exception of Delta Dental) lease their networks to and from each other, but there are several organizations who exist solely to offer leasing connections without actually providing any benefits plans of their own. They simply operate as middle-men, pass throughs for other companies to access each other’s networks. 

The web of interconnected PPOs is staggeringly dense. A dentist could inadvertently agree to participate with literally hundreds of PPOs around the country by signing a contract with a single major network.

Not only do PPOs gain access to each other’s provider networks through leasing, they can also access lower contracted fee schedules providers have with different PPOs. In fact, insurance companies actually receive a financial advantage when another PPO uses their fee schedule to reimburse a provider. This process is referred to as cherry picking. This is of course perfectly legal and totally not like market collusion at all, like it would be if two dentists were to share similar information about their fees. I digress. 

When you submit a claim to a benefits plan, it goes through an electronic clearinghouse that analyzes possible reimbursement options that the company has given the various contracts and leasing agreements you’re participating with. 

With so many possible relationships across the country, the result is that insurance companies will usually be able to find some way to reimburse providers lower fees than they expect.

And since those contracts and leasing agreements also typically prevent balance billing patients, dentists are forced to just write off the difference as lost revenue, many times not even covering their overhead to see that particular patient.

Your Options for Which Networks You Can Leave are Limited By Your Patient’s Plans and Your Contracts

Now we have a good foundation for understanding how dental insurance actually works. Let’s walk through the process of creating a strategy for your individual office that will allow you to successfully (make more money, don’t lose all your patients) leave networks or renegotiate contracts.

How many different insurance carriers are you contracted with?

How many do you have indirect relationships with via leasing agreements in your direct contracts? 

You need to know this information before you can make any real changes. If you remove one contract, but it isn’t the lowest paying fee schedule in your practice, not much is likely to change. You have to start at the bottom – the lowest fees – and work your way up. The next lowest-payer will take the place of the contract you terminated, and then the next after you leave that one, and so on until you’re actually making serious revenue gains. 

Carefully review each of your current contracts

You also need to meticulously comb through the EOBs your office receives to determine what fee schedules are being used to reimburse each claim. If you see the names of two different insurance companies on an EOB – usually one on top and one towards the bottom – that means that one used the fee schedule from the other’s contract with you to reimburse that claim.

What is your patient saturation for each contract? Meaning, how many of your patients’ benefits plans fall under each one of your contracts? To know that, you need to make a comprehensive list of every plan your patients bring into your office.

What types of plans are all of your patients using?

How many of your patients are using self-funded plans? How many have fully insured benefits? What do those numbers look like as a percentage? Now, break that down by contract. For each carrier you have a contract with, what percentage of that carrier’s plans are self-funded vs fully insured? That’s how you can figure out your patient saturation for each plan type, under each contract.

How much do each of your patients’ plans reimburse you?

Remember the hierarchy of fee schedules that determines which networks are leased from by others? You need to identify the fees you’re currently getting, and the MACs you could be getting from each plan. If a significant segment of your patients are using self-funded plans that have low MACs, then you won’t be able to create a significant revenue increase by going OON with those plans. You would actually most likely lose those patients, since most self-funded plans don’t have OON coverage at all in addition to having low MACs. 

Do you have a significant portion of patients who chose fully funded plans? Even if those plans are currently paying you low fees, they could just be pulling from one of your direct contracts with a low fee schedule. If those fully funded plans have higher MACs on benefits claims from OON providers, you could create huge revenue growth by leaving contracts in the right order. 

You must maneuver your contracts in such a way as to result in you being OON with the high MAC plans, and then those plans not having any other avenues to reimburse you with lower fees via leasing connections. Then you would just need to align your UCR fees with the average MACs you can receive from your patients plans. 

The goal is to maximize the revenue you create from each patient you see, without passing on additional expenses your patients don’t expect.

If your patients suddenly have out-of-pocket expenses for preventative care they expect to be free, that’s going to disrupt their customer experience, likely causing them to find a new dentist. 

There are several other factors we consider when we’re working on patient retention strategies for our clients. But this post is already long enough, certainly dense enough, so I’ll save those details for next time. 

How can you actually solve this problem?

If you read this whole thing and you’re left feeling like this process would be impossible for you to pull off successfully, I have good news. It most likely would be impossible! Dental practice owners don’t have the time nor the data necessary to maneuver through the complexities of dental insurance contracting. That’s why you should give us a call. We specialize in this process, it’s the only thing we do, and we do it with great success.