' It should be noted that a small part of the apparent decline in dental care
coverage stems from the 1988 Employee Benefits Survey expansion to in-
clude all service industries. Dental care coverage has traditionally been more
prevalent in goods-producing rather than service-producing industries. For
more information, see Employee Benefits in Medium and Large Firms, 1988,
Bulletin 2326, Bureau of Labor Statistics, 1989.

? For example, multivariate analysis of Current Population Survey data
found that growth in the employee share of coverage costs was responsible for
76.4 percent of the decline in participation in employer-sponsored health care
coverage between 1989 and 1996. For more information, see AFL-CIO,
Paying More and Losing Ground: How Employer Cost-shifting is Eroding
Health Coverage of Working Families, Washington, DC, AFL-CIO, 1998.

> Data on employce contributions for dental care were first available in
the 1988 survey. For more information, see Employee Benefits in Medium
and Large Private Establishments, 1993, Bulletin 2456, Bureau of Labor
Statistics, 1994; and Employee Benefits in Medium and Large Firms, 1988.

* The remaining 1 percent was in other types of plans such as exclusive
provider organizations. Like PPO’s, these organizations contract with pro-
vViders to furnish services at a discount in exchange for increased patient vol-
ume. Unlike PPO’s, however, participants receive no reimbursement if they
are treated by a non-network provider.

* For more information, sec Employee Benefits in Medium and Large
Private Establishments, 1995, Bulletin 2496, Bureau of Labor Statistics,
1998; and Rita S, Jain, “Employer-sponsored Dental Insurance Eases the
Pain,” Monthly Labor Review, October 1988, pp. 18-23.

° For more information on dental HMO’s, sce Christopher Brown, “Den-
tal Benefits: Setting Objectives, Picking A Plan,” Employee Benefit Plan
Review, March 1995, pp. 30, 32-33.

__7 APPOisa type of fee-for-service plan in that the provider does not get
reimbursed until a service is, l.

* The Bureau of Labor Statistics discontinued publication of information
‘on employee dental care costs and extent of cost sharing after the 1994 sur-
veys of small private establishments and State and local governments.

° These figures are based on all benefit structures—employer paid (wholly
or in part), entirely employee paid (voluntary coverage), individual direct

49 Compensation and Working Conditions Summer 1998

—ENDNOTES—

paid, etc. For more information, see National Association of Dental Plans,
1996 Census and Directory, Dallas, TX: National Association of Dental Plans,
1997,

'° For more information on changes in funding arrangements during the
1980-86 period, see Jain, “Employer-sponsored Dental Insurance,” pp. 18-
23

" For more information, see Employee Benefits in Medium and Large
Private Establishments, 1995.

” Ibid.

°When orthodontia coverage is available, itis usually limited to depen-
dent children, .

“Some plans paying 100 percent of charges may impose a deductible and
limit payment to a maximum dollar amount.

'*For more information on incentive plans, see Ronald L. Huling, “Den-
tal Plan Design,” in Jerry S. Rosenbloom, ed., The Handbook of Employee
Benefits—Design, Funding, and Administration (Fourth Edition) New York:
‘McGraw-Hill, 1996, pp. 199-215,

‘*For more information, see Employee Benefits in Medium and Large
Private Establishments, 1995.

” The remaining participants were in plans applying the deductible to all
categories except orthodontia (3 percent), all categories except exams and
orthodontia (1 percent), and other category combinations (6 percent). For
more information, see Employee Benefits in Medium and Large Private Es-
tablishments, 1995.

'* Ten percent had levels between $101 and $199. For the remaining
Participants subject to pretreatment authorization, the dollar amount could
not be determined. For more information, see Employee Benefits in Medium
and Large Private Establishments, 1995.

° The Employee Benefits Survey only collects dental benefits mforma-
tion on plans that are either fully or partially paid for by the employer. For
this reason, it cannot be determined how much of the decline in participation
is due to employee coverage under voluntary dental plans. For more informa-
tion on voluntary plans, see Alain Sherter, “Voluntary Dental Plans Offer
Employers Affordable Solution to Employee’s Dental Care Needs,” Employee
Benefit Plan Review, January 1997, pp. 27-29.


Chart 3. Percent of dental plan participants with
annual nonorthodontia benefit maximums, full-time
employees, medium and -large private establish-
ments, 1995
Percent

60

50

40

30

20

10

0

Less than $1,000  $1,001-
$1,000 $1,499

$1,500 Over

$1,500

Annual maximum

Chart 4. Percent of dental plan participants with
life-time orthodontia benefit maximums, full-time
employees, medium and large private establish-
ments, 1995.

Percent
50
40
30
20
10
0
Less $1,000 $1,001- $1,500 Over
than $1,499 $1,500
$1,000

Lifetime maximum

ance increases to 70 percent the following year, 80 percent
the next year, and 90 percent the year after. If the partici-
pant fails to obtain the required level of care, the coinsur-
ance rate would revert back to the original 60 percent.’

Deductibles. FFS and PPO plans often require participants
to meet a specified deductible before benefits will be paid.
A majority of participants (61 percent) were in plans that
required a yearly deductible, averaging $46. Among par-
ticipants with annual deductibles, 65 percent were subject
to a $50 deductible, 24 percent to a $25 deductible, and 8
percent to deductibles over $50. Few dental care partici-
pants (1 percent) were in plans with a lifetime deductible
or both a yearly and a lifetime deductible (3 percent).'*
Procedures subject to a deductible differed among plans.
Of the participants with a deductible, 20 percent were in
plans that required a deductible for all covered procedures.
The greatest proportion (46 percent) were in plans that re-
quired a deductible for all procedures except exams and x
rays, and 24 percent were in plans requiring a deductible
for all procedures except exams, x rays, and orthodontia.””

Maximum benefit provisions

Most dental plans included a calendar year plan maxi-
mum applicable to nonorthodontic expenses. Orthodontic
expenses were usually subject to a separate lifetime maxi-
mum.

Dental plans with an annual benefit limit for
nonorthodontic care covered 82 percent of plan participants.
Among participants with limits, the average limit was
$1,166. Almost half (49 percent) of these participants had
a benefit maximum of $1,000, 15 percent had a maximum
of $1,500, 14 percent had maximums less than $1,000, and
10 percent had maximums over $1,500. (See chart 3.)

Most participants with orthodontia benefits (83 percent)
had lifetime benefit maximums. Among participants with
limits, the average was $1,138. The greatest proportion

(38 percent) had a $1,000 limit, 19 percent had a $1,500
limit, 22 percent had limits of less than $1,000, and 7 per-
cent had limits over $1,500. (See chart 4.)

Pretreatment authorization

Almost half (49 percent) of employees with dental cov-
erage were in plans requiring pretreatment authorization.
This means that if a procedure is expected to exceed a cer-
tain cost, it must be approved by the dental claims adminis-
trator before reimbursement will be made. For participants
in plans with this feature, the average minimum expense
requiring preauthorization was $225. Thirty-eight percent
had preauthorization levels of more than $200, 26 percent
had a level of $200; and 16 percent had levels of $100.'*

Voluntary coverage

Data from the Employee Benefits Survey show that par-
ticipation in employer-provided dental plans has declined
in recent years. From the information collected, however,
it cannot be determined if the decline occurred because
employers stopped offering dental care coverage, employ-
ees chose to be covered under another family member’s plan,
or employees dropped coverage because of increases in cost-
sharing requirements.

A study by the Life Insurance Marketing Research As-
sociation found that 56 percent of employees without den-
tal insurance rank it, after medical care coverage, as the
most desired benefit. Some employers have sought to bal-
ance their need to control health care spending with em-
ployees’ demand for dental coverage by providing volun-
tary dental coverage. Under a voluntary plan, employers
offer dental coverage at less costly group rates, but employ-
ees pay the entire cost of the coverage. Offering voluntary
dental plans may increase employee satisfaction with ben-
efits coverage and allow employers to maintain or enhance
benefit offerings without incurring additional costs.'?

Compensation and Working Conditions Summer 1998 48


Employee Benefits

Dental Care
Benefits, 1995

BY ANN C. FOSTER

Although declining since 1984,a majority of full-
time employees had employer-provided dental
care coverage in 1995. Over the years, the
types of plans providing coverage and the
methods of financing them have changed.

During the early 1980s, dental care benefits became more
prevalent among employees in medium and large private
establishments (those with 100 or more workers). Data
from the Employce Benefits Survey (EBS) showed that in
1980, 56 percent of all full-time employees in medium and
large private establishments participated in an employer-
provided dental care plan. Participation reached 77 per-
cent in 1984, but declined to 57 percent in 1995." (See chart
1)

A possible factor affecting participation rates might be
that employers, attempting to control health care costs, in-
creased employee cost-sharing requirements? In 1993, 54
percent of all dental care participants in medium and large
Private establishments contributed to the cost of individual
coverage compared with 34 percent in 1988. In that same
year, 66 percent contributed to the cost of family coverage
compared with 50 percent in 19882

This articie uses data from the 1995 Employee Benefits
Survey of medium and large private establishments to ex-
amine dental care benefits provided to full-time employees.
The initial sections describe types of dental plans, includ-

ing fee arrangements and financial intermediaries. The’

article then examines covered services, reimbursement
methods, maximum benefit provisions, and pretreatment
authorization clauses.

Types of dental plans

In 1995, the majority of dental care participants (85 per-
cent) were covered under a traditional fee-for-service (FFS)
plan. With this type of plan, covered individuals receive
dental care from the providers they choose. The plan reim-
burses either the provider or the individual for covered ex-
penses.

Employers have attempted to control dental care costs
by adding to or replacing traditional FFS plans with dental

‘Ann C. Foster is an economist in the Division of Compensation Data Analysis
and Planning, Bureau of Labor Statistics.

Telephone: (202) 606-6222

E-mail: Foster_A@bls.gov

45 Compensation and Working Conditions Summer 1998

health maintenance organizations (HMO’s) and preferred
provider organizations (PPO’s). In 1995, 8 percent of den-
tal care participants were in dental HMO’s, and 6 percent
were in dental PPO’s.* In 1980, the combined enrollment
in both plan types accounted for 2 percent of dental plan
participants.>

Dental HMO’s provide comprehensive dental benefits
to a defined population of enrollees in exchange for a fixed
fee per member (capitation), regardless of the work per-
formed. This differs from FFS plans where dental care pro-
viders are reimbursed only when a service is performed.®

Dental PPO’s contract with providers to furnish services
at a discount in exchange for increased patient volume. PPO
Participants incur lower out-of-pocket expenses when they
are treated by in-network providers.”

Coverage costs. The 1995 Employee Benefits Survey does
not provide information about employee dental care costs.*
Data from the National Association of Dental Care Plans,
however, does show that premiums for dental FFS plans
were higher than those for dental HMO’s and PPO’s. For
example, in 1995, the median FFS premium for single cov-
erage was $18 per month compared with $15.50 for PPO’s
and $10.95 for HMO’s. For family coverage it was $48,
$44.50, and $25.12, respectively?

Chart 1. Percent of fulltime employees with dental
care benefits, medium and large private
establishments, selected years, 1980-95

Percent
1

eo8 F888

1980 1982 1984 1986 1989 1991 1993 1995



Financing methods

The term “financial intermediary” refers to the organi-
zation responsible for paying dental care claims. Dental
care financial arrangements have changed since 1980, when
the majority of participants (77 percent) were in plans with
a commercial insurance company as the financial interme-
diary.'° In 1995, many participants were in plans with Blue
Cross/Blue Shield, seif-insurers, and other independent or-
ganizations as financial intermediaries. The following tabu-
lation shows the percent of participants in each plan type
by financial intermediary in 1995.

FFS =HMO-— PPO

Total participants 100 100 100
Blue Cross/Biue Shield 6 ant 18
Commercial insurance

7 25 15
61 5 3
15 57 28

NOTE: Due to rounding, totals may not equal 100.

Self-insured. 1n a self-insured plan, the sponsor, usually
the employer, is the financial intermediary and bears the
financial risk of paying for covered services. Employers
who self-insure benefits may enter into an “administrative
services only” (ASO) contract with a third party to disperse
the employer’s funds to pay claims and handle other ad-
ministrative details."

Another option for self-insuring employers is a mini-
mum premium plan (MPP). In an MPP arrangement, em-
ployers purchase insurance to cover claim costs above a
designated amount. The employer is responsible for costs
below the designated limit, and the insurance carrier is re-
sponsible for the rest.'?

In 1995, few dental HMO participants (5 percent) were
in self-insured plans. However, 38 percent of dental PPO
and 61 percent of dental FFS participants were in self-in-
sured plans,

Commercial insurance companies. Instead of being self-
insured, employers may contract with a commercial (for-
profit) insurance company to pay claims. The employer
pays the insurance company a premium to cover all claim
costs and administrative expenses. In 1995, insurance com-
panies were the financial intermediaries for 25 percent of
HMO, 17 percent of FFS, and 15 percent of PPO partici-
pants.

Blue Cross/Blue Shield. Blue Cross/Blue Shield is a net-
work of nonprofit insurers. Although many plans use the
Blue Cross/Blue Shield name, each network member usu-
ally operates independently in a specific geographic area.
In 1995, Blue Cross/Blue Shield was the financial interme-
diary for 18 percent of PPO, 11 percent of HMO, and 6
percent of FFS dental plan participants.

Chart 2. Percent of fulltime employees with dental
care benefits by type of procedures covered,
medium and large private establishments, 1995

seseeel

Exams, Surgery and Periodontics Crowns and Orthodontia
xrays, and endodentics prosthetics
filings

Other. Independent organizations other than Blue Cross/
Blue Shield and commercial insurance companies also serve
as financial intermediaries. As the tabulation shows, other
independent organizations were the financial intermediar-
ies for 57 percent of dental HMO, 28 percent of PPO, and
15 percent of FFS participants.

Covered services

Most dental plans cover preventive and restorative ser-
vices. Preventive services include routine exams and x rays.
Restorative services include fillings, dental surgery, endo-
dontics (root canal therapy), periodontics (treatment of gum
disease), crowns, and prosthetics (replacement of missing
teeth with bridgework or dentures).

Chart 2 shows that in 1995 all full-time employees
participating in a dental care plan had coverage for exams,
x rays, and fillings. Virtually all had coverage for surgery
and endodontics (99 percent), periodontics (97 percent),
and crowns and prosthetics (96 percent). Orthodontia (cor-
rection of malpositioned teeth) coverage was available to
fewer participants (71 percent).'?

Reimbursement

Plan reimbursement for dental expenses is most often
based on a proportion of the usual, reasonable, and custom-
ary charge for a procedure. Participants who were subject
to this reimbursement method ranged from 77 percent of
those with coverage for exams to 85 percent of those with
orthodontia coverage. (See table 1.) The proportion of
charges paid varied by type of procedure. Less costly pro-
cedures such as exams and x rays were more likely to be
reimbursed at 100 percent.'* Fillings, surgery, endodon-
tics, and periodontics were more apt to be covered at 80
percent. The most expensive procedures—crowns, pros-
thetics, and orthodontia—were more often covered at 50
percent. (See table 2.)

Only small proportions of workers were in plans that
covered a procedure in full without requiring a deductible
or specifying a limitation on the maximum dollar amounts
to be paid. As table 1 shows, coverage in full was more
common for less costly exams and x rays and almost non-

Compensation and Working Conditions Summer 1998 46


| method by type of dental procedure, full-time employees, medium and large private establishments, 1995

Dental procedure
Reimbursement method! Orthod:
Exams | Xray | Filings | Surgery | Endodor- erode "| Crowns. |Prosthetios| “tose

Total participants ...... 100 100 100 100 100 100 100 100 100

Percent of usual, customary,
and reasonable charge .. 7 79 80 81 81 81 83_ 83 85
Covered in fuli2 14 14 8 5 4 4 3 3 2
Scheduled cash 6 6 8 8 7 7 8 8 6
Copayment 5 1 3 5 6 5 6 6 12
Other? 2 3 3 3 3 3 2 2 2
- - (4) (4) (4) 2 (4) 1 3

benefits.

1 "Sum of individual items is greater than total because some participants were in plans with
09 Nee pane poyng bo

tncludes plans paying the full cost with no deductible or dollar maximum:

3 Includes plans ‘Plans providing benefits on an incentive schedule and plans providing discounted

4 nore tgan OS pent,
NOTE: Because of rounding, sums of individual tems may not equal total. Dash indicates no
‘employees in this category.

Table 2. Percent of usual, customary, and reasonable charge paid for selected dental procedures, full-time employees, medium and

large private establishments, 1995
Dental procedure
Percent of usual, customary,
andreasonable charge 1 exams | x-ays | Filings | Surgery Endodon- | Periodon- | Crowns | Prosthetics Orthodon-
100 100 100 100 100 100 100 100 100
- () @) (aa) “) @) 1 1 @)
(a) 1 7 6 8 " 69 75 80
- - - - - - : () -
1 1 2 3 2 3 10 10 6
“) «) 3 3 3 3 2 2 1
1 1 6 6 6 6 3 3 1
24 23 67 65 67 65 9 6 8
(a) 1 3 3 3 3 () (*) -
5 7 6 7 6 6 4 1 ()
> - (") () () @) - - @)
ral 64 8 8 6 4 2 1 3
() (") “) @) “) ) () () ()

4 Less than 0.5 percent.
2 Includes, pens that paid 100 percent of charges, but imposed a deductible and
limited payment to a maximum dollar amount.

existent for more expensive crowns, prosthetics, and orth-
odontia.

Some participants were in plans with reimbursement
based on a schedule of cash allowances. In this type of
arrangement, there is a specific maximum dollar amount
the plan will pay for each covered procedure. For example,
a plan might pay no more than $390 for a complete upper
denture even if the usual, customary, and reasonable charge
is substantially higher.

Other participants were in plans requiring a copayment,
after which benefits would be paid in full. Copayments of
$5 to $10 often apply to preventive care, with higher

47 Compensation and Working Conditions Summer 1998

NOTE: Because of rounding, sums of incvial tems may not equal total. Dash indicates
no employees in this category.

copayments for more costly procedures.

Few participants (2-3 percent, depending on the proce-
dure) were in plans with “other” forms of reimbursement.
This “other” category includes plans with discounted ben-
efits available from approved providers and incentive plans
which encourage participants to visit the dentist regularly
for preventive and maintenance (minor restorative) care in
order to reduce the incidence of more serious and costly
dental problems. For example, an incentive plan might
have an initial coinsurance rate of 60 percent for preven-
tive and maintenance procedures. If the participant ob-
tains the required level of care during the year, the coinsur-