We have not changed the key actuarial methodologies used by management to estimate the IBNR and reported claims in process components of our claims payable liability during the periods presented, and
Healthcare services expense is recognized on a monthly basis. In the case of the fully-insured dental segment, healthcare services expense is calculated by taking the paid claims associated with the fully-insured membership and adjusting this amount for the change in the claims payable liability determined using the actuarial estimates discussed above. For the self-insured dental segment, the healthcare services expense is based solely on the paid claims for the self-insured membership. In most cases, our reimbursement to our participating providers for covered dental services under the dental HMO are subject to a 10% withhold by us. The amounts withheld are not retained in a separate fund and we have no obligation to pay any portion of the amounts withheld to the providers. At the end of each year, our Board of Directors determines, in its sole discretion, how much if any of the provider withhold can be paid out to participating providers. Provider withhold payments authorized by our Board during the fiscal year are recorded as an increase to healthcare services expense. Based on our 2009 operating results, a 1% increase in dental services utilization above the anticipated level would translate into an increase in our claims payable liability of approximately $370,000.
Fully-Insured-Membership contracts are written on an annual basis and are subject to cancellation by the employer group upon thirty days written notice. The Company amended its fully-insured dental HMO contracts and dental indemnity contracts to be non-cancelable by the Company effective May 1, 2008 and its fully-insured dental PPO contracts to be non-cancelable by the Company effective June 1, 2008. The Company’s unearned premium revenue was approximately $20,959,000 and $21,606,000 at December 31, 2009 and 2008, respectively, and relates to the estimated premium revenue associated with the remaining contract periods. Related amounts recorded in unbilled accounts receivable were approximately $19,985,000 and $20,845,000 at December 31, 2009 and 2008, respectively. Premiums are due monthly in advance and are recognized evenly as revenue during the period in which the Company is obligated to provide services to members. Any amounts not
Each year the Board evaluates the performance of the Company’s dental plans, capital and surplus requirements prescribed by the Ohio Department of Insurance, factors affecting the Company’s financial strength rating, funding needed to support strategic objectives for the coming years and any other factors deemed relevant by the Board and, based on that evaluation, determines whether or not to authorize the payment to the providers of any portion of the provider withhold. Once authorized by the Board, such amounts are recorded as additional healthcare services expense in the period authorized and shown as additional claims payable liability until paid. There was no withhold return authorized for 2009.
Reinsurance-In 2008 and prior years, the Company ceded portions of its written premiums. As such, the Company limited its loss exposure to that portion of the insurable risk that it retained. However, if a reinsurer failed to honor its obligations, the Company could suffer additional losses as the reinsurance contracts did not relieve the Company of its obligations to policyholders. The Company terminated its reinsurance contracts effective May 31, 2008. Dental insurance premiums ceded were approximately $121,000 and $228,000 for the years ended December 31, 2008 and 2007, respectively. The healthcare services expense ceded was approximately $106,000 and $189,000 for the years ended December 31, 2008 and 2007, respectively. The Company had approximately $5,000 of reinsurance recoverable and prepaid reinsurance premium net of reinsurance payable as of December 31, 2008. The Company did not have any reinsurance recoverable and prepaid reinsurance premium net of reinsurance payable as of December 31, 2009.
Company’s disclosures, primarily related to references to U.S. GAAP, but did not have a material effect on the Company’s consolidated financial condition and results of operations.
Generally accepted accounting principles differ in certain respects from the accounting practices prescribed or permitted by state insurance regulatory authorities (“statutory-basis”). The statutory-basis net income (loss) of Dental Care Plus was approximately $(374,600), $641,000, and $494,000 for the years ended December 31, 2009, 2008, and 2007, respectively. Statutory-basis net worth was approximately $4,921,000 and $5,174,000 at December 31, 2009 and 2008, respectively.
At December 31, 2009, the fair value of the mortgage note is approximately $1,097,000.