Escaping Dental PPO Contracts Pt. 2: Self-Funded vs Fully Insured Plans

In the first part of this blog series, I mentioned several key components that dental practice owners will have to understand and be able to manage, in order to successfully leave upside down insurance contracts.

Before we continue exploring these concepts in more detail, let’s answer another important question.

What’s our definition of “success?”

Does success mean more new patients? Increased production? Your schedule is filled with patients to maximum capacity each day?

We don’t think so. We don’t measure the value we create for our clients in terms of higher production, simply because being productive doesn’t necessarily make your business more profitable on its own. Production measures the fees you submit to your patients’ benefit payers. Increasing production is easy, just raise your fees! 

Only, that won’t raise the reimbursements you get back. That’s what we’re trying to accomplish here. Our goal is to increase the actual revenue you’re able to generate from every procedure and treatment you submit a claim for. And, we need to achieve that goal without losing your existing patient base. 

Repositioning your practice’s involvement with dental plans takes time and dedication. But the results ultimately far outweigh the effort that goes into achieving them. Read more about the real return we create for our clients in this case review.

So, let’s start by examining the first basic dental insurance concept we take into account whenever we begin working with a new client. 

Self-funded versus Fully Insured Dental Benefits Plans

How do self-funded plans work?

  • Provided to employees by self-funded employers, who are 100% liable for all claims paid.
  • Meaning all benefits claims are paid for by the employer, not the insurance carrier. 
  • Administered either in-house or by a Third-Party administrator, which could be a major insurance company such as Delta Dental, Aetna, or any number of other carriers. 
  • Employers deposit a set amount of benefit funds into a trust account at set intervals, such as every 90 days. 
  • Those funds are used to pay out claims. 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. 
  • Self-funded plans fall under ERISA, and not state prompt-payment laws. ERISA states a claim must be processed/paid within a reasonable amount of time, usually 45 days. Unless, there are no funds to issue payment.

A common problem dental practices have with self-funded plans occurs when they file claims for patients who have FEDVIP, Medicare/Medicaid, or state/federal retirement benefits plans. Since these plans don’t fall under the jurisdiction of the state insurance commissioner, the administrators can essentially avoid paying claims indefinitely if they want to, simply by not adding funds to the employee’s account. 

How do fully insured plans work?

  • Fully funded plans are purchased by employers directly from benefits payers. 
  • Here, the payers are financially responsible for paying claims, not the employers. 
  • Payers collect premiums from employers/employees, and pay benefits out of those premiums. 
  • Fully insured plans have annual maximums so payers (insurance companies) won’t end up on the hook for claims over the amount paid for by premiums collected.
  • Fully insured plans fall under the jurisdiction of the state insurance commissioner for whichever state the plan was originally sold in, not the state claims are filed from. So, if you’re a dentist practicing in California, but you file a claim for a patient who’s employer purchased their plan in Florida, then that claim will be processed according to Florida state insurance law.

Why does the type of plan your patients have matter for dentists?

Every plan will have different fixed Maximum Allowable Charges (MACs). MACs govern the highest amount the plan’s administrator, whether they’re an employer, TPA, or insurance payer, is willing to pay for each individual CDT Code that dental practices file claims for. 

Self-funded plans often have lower MACs than fully insured plans do. And, as we saw previously, they fall under the jurisdiction of ERISA and not state insurance laws. But there’s another problem with self-funded plans, besides the possibility of dentists not getting paid for claims to self-funded plans because of the administrator’s ability to not fund the account benefits are paid from. 

If you went out of network with the administrator of your patient’s self-funded plan, and then you submitted fees higher than that plan’s MACs, the administrator would place the additional financial responsibility for paying the difference back onto your patient. Because the insurance companies aren’t liable for paying benefits from self-funded plans, and because the employer or TPA will have strict MACs set, it’s easy for them to pass that burden onto your patients. 

You can collect the balance from your patients, but that’s going to create a negative experience for them if they’re suddenly being billed for treatments they expected to be fully covered or discounted. 

Or you could align your office fees with the lowest MACs out of any self-funded plans your patients have, so you don’t accidently create a new expense for any of them. That’s obviously not a good solution either.

Option three, you can explain to your patients who have low-paying plans that you can’t accept their dental insurance in your office, because the plan they chose wants to dictate a lower-standard of care for them than you are willing to provide as their doctor. 

Instead of taking responsibility for your patient’s choices, you can instead offer to help them select a better plan during open enrollment, or offer for them to join your in-house plan instead. Or, as much as you probably don’t want to, you may just have to lose them as a patient in order to increase the reimbursements you can make from claims you submit to other higher-paying plans under the same contract. It doesn’t make sense to take a loss on the revenue you could be making from 95 patients, just so you can keep five patients who chose the cheapest plans available to them that aren’t going to reimburse you fairly for the care you provide. Remember, there’s a difference between being productive and being profitable.

Creating an insurance strategy for your practice according to the different plans your patients bring into your office

What percentage of your patients have self-funded plans? What about fully insured?

What is the percentage mix of patients with self-funded and fully insured plans, under each of the dental insurance contracts in your office?

What are the MACs for every single patient’s plan, both In and Out-Of-Network?

How much could you raise your UCR office fees for the plans with the highest MACs out of network if you terminated those contracts?

Does your patient saturation with each type of plan under that contract give you the room to raise your fees, without losing all of your patients under that contract?

For example, if you could raise your fees and increase your reimbursements from plans used by 40% of patients under that contract, but then the other 60% would suddenly be paying far more than they used to, would that be worth it? 

Could you potentially make more by increasing your revenue from the 40% than you would lose if 60% left your practice?

Is it possible to find a middle ground where you increase your office fees for some treatments, and lower them for others, according to the MACs available under each patient’s plan, so that you raise your overall revenue while maximizing patient retention at the same time?

These are a handful of the analyses we run for our clients every day. We help them increase their revenue as much as possible, while losing as few patients as possible.

How are you going to have those difficult conversations with patients who’s billing is going to change when you go Out-Of-Network with their benefits plans? 

We can help prepare you and your office staff to walk your patients through changes to your network status with their plans. Our clients have found that their patients are actually very appreciative when someone takes the time to actually explain how their insurance works, why the treatment their doctor recommends is necessary, and how much they will actually end up owing for that treatment. 

Because we have the data and the experience to get so granular with how our clients manage each plan in their office, and because we also focus heavily on patient relationships, Solutions 101 clients typically only experience a 2-5% patient attrition rate over the course of their entire case.

But wait, it gets even more complicated!

In the next part of this blog series, we’ll take a deep dive into how Leased Networks affect your ability to actually make real changes to your revenue by repositioning or terminating insurance contracts. Do you know how exposed your practice is to leased network access? S101 can help you find out!