DENTAL BENEFITS IN THE 21st CENTURY

INDUSTRY TRENDS AND OPPORTUNITIES

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Course Goal: An Idea Merchant

Share information and ideas that can help you provide better solutions to your current dental clients and prospects– Overall Economic/Societal perspective– Impact on health– Historical overview (crystal ball)– Current trends– Market Opportunities

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Why “Dental” Hits Home Toothbrush is #1 invention Americans can’t live

without* Growing understanding of link to overall health Makes employees more productive, loyal and happy Expensive and getting more so

*2003 Lemelson-MIT Invention Index Survey

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Dental Work Is Expensive…

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…Very Expensive!

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Adult Cleaning

1 Surface Amalgam

Child’s 1st Visit

PFM Crown

Denture (upper)

Implant (prosthesis)

Source:80th percentile of Medicode (San Diego)

How Expensive Is It?

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Adult Cleaning

1 Surface Amalgam

Child’s 1st Visit

PFM Crown

Denture (upper)

Implant (prosthesis)

Source:80th percentile of Medicode (San Diego)

How Expensive Is It?

$ 96

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Adult Cleaning

1 Surface Amalgam

Child’s 1st Visit

PFM Crown

Denture (upper)

Implant (prosthesis)

Source:80th percentile of Medicode (San Diego)

How Expensive Is It?

$ 96

$ 131

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Adult Cleaning

1 Surface Amalgam

Child’s 1st Visit

PFM Crown

Denture (upper)

Implant (prosthesis)

Source:80th percentile of Medicode (San Diego)

How Expensive Is It?

$ 319

$ 96

$ 131

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Adult Cleaning

1 Surface Amalgam

Child’s 1st Visit

PFM Crown

Denture (upper)

Implant (prosthesis)

Source:80th percentile of Medicode (San Diego)

How Expensive Is It?

$ 319

$ 96

$ 131

$1,000

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Adult Cleaning

1 Surface Amalgam

Child’s 1st Visit

PFM Crown

Denture (upper)

Implant (prosthesis)

Source:80th percentile of Medicode (San Diego)

How Expensive Is It?

$ 319

$ 96

$ 131

$1,000

$1,511

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Adult Cleaning

1 Surface Amalgam

Child’s 1st Visit

PFM Crown

Denture (upper)

Implant (prosthesis)

Source:80th percentile of Medicode (San Diego)

How Expensive Is It?

$ 96

$ 319

$1,000

$1,511

$2,524

$ 131

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1980 $ 13.3 billion

1990 $ 31.5 billion

1999 $ 56.0 billion

2005 $ 85.0 billion

2010 (projected) $108.9 billion

Source: U.S. Health Care Administration

Dental Spending in the U.S.

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Dental Spending in the U.S.

How Americans Pay

Private Health Insurance $27.7 billion

Out of Pocket Payments $25.6 billion

All Other $ 5.1 billion

Source: U.S. Health Care Administration

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Dental Is Important To Society

People with dental benefits are twice as likely to go to the dentist

Every $1 spent on preventive dentistry saves over $4 in restorative costs

Poor dental health impacts every age group Direct link between dental disease and major

health problems

Source: National Institute of Health

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Importance to Children

Dental caries (tooth decay) is the most common chronic childhood disease – 5 times more common than asthma and 7 times more common than hay fever

Over 50 percent of 5-9 year-old children have at least one cavity or filling, and 78 percent among 17 year-olds

51 million lost school hours each year Pain and suffering due to untreated diseases can

lead to problems in eating, speaking, and attending to learning

Source: Department of Health and Human Services

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Importance to Adults

For every adult 19 years or older without medical insurance, there are three without dental insurance

164 million hours of lost work each year

Source: Department of Health and Human Services

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Importance to Older Adults

Most older adults lose their dental insurance when they retire

30% of adults 65 years and older wear dentures (compared to 46% 20 years ago)

23% of 65-74 year-olds have severe periodontal disease

Source: Department of Health and Human Services

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Periodontal Disease is a Nationwide Epidemic 80% of adults will have some form of periodontal

disease 2nd most prevalent disease in U.S. after heart disease Affects more than 50 million people Only 15-20% receive treatment $6 billion is spent annually to treat the disease in the

US

Source: U.S. Department of Heath and Human Services

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The Link Between Periodontal Disease and Overall Health Systemic

– Diabetes– Heart Disease– Respiratory Disease– Osteoporosis– Pre-term, low birth weights– Pancreatic Cancer– Pneumonia

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History Repeats Itself

Medical* Dental*

Insurance 1940’s 1960’s

HMO 1970’s 1980’s

PPO 1980’s 1990’s

POS 1990’s 2000’s

*Decade of Growth

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21st Century Medical Trends

2002 HealthAllies Survey 2004 Medicare discount Rx card legislation 2005 CalPERS decision to place cost above access 2006 DMHC decision to regulate discount plans 2006 Wal-Mart Launches $4 Rx 2006 Guardian Survey found 89% of Americans

understand oral-health connection

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21st Century Medical Trends 2007 average employee healthcare cost is $7,211* Between 2000 and 2007**

– Cost of providing health benefits rose 100% – Worker wages increased 25% – Overall inflation increased 21 percent

Employee Health Coverage Continues to Erode– 6.4 million fewer workers with employer-provided

health insurance in 2006 than 2000

*Source: EBRI Issue Brief, Dec. 2007**Source: Economic Policy Institute

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21st Century Medical Trends Integrated medical-dental health plans

– 2007 Aetna/Columbia University study• 145,000 member study found early treatment of

perio care resulted in lower overall medical costs for members with diabetes, coronary artery disease and stroke

– 2008 BC/BS of Tennessee• Members who received diagnostic or preventive

care had 2% lower healthcare costs ($5.5 million/annual savings)

• 16% fewer admissions• Fewer incidences of coronary artery disease,

congestive heart failure, diabetes and hypertension

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21st Century Medical Trends

Health risk appraisals are offered by 83 percent of companies (up 18% from ’07)*

Introduction of tiered PPO network benefits CDHPs offered & enrolled increase

– Nearing 50% of employers offer or expect to offer

*Source: Watson Wyatt/National Business Group on Health

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21st Century Medical Trends

Growing Medical Voluntary Market*– Growing individual market – 27 million according to the US

Census Bureau– Ninety-four percent of medical brokers sell at least some

voluntary products– Problematic for carriers

Growing use of the internet for information**– Plays a role in nearly 60% of all health insurance sales– 71% of insured people with a carrier for less than three

years are still shopping online for insurance Medical tourism: alive and growing

*Eastbridge 2007 Spotlight Report**Norvax

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Traditional Dental Benefits

PPO Plans have grown 68% over last 6 years and represent 54% of the dental market

Insurance plans have shrunk 53% and now represent 23% of the dental market

Dental HMO’s have declined 50% and now represent 14% of the dental market

Discount Dental Plans account for 8% of the dental market Direct Reimbursement Plans account for less than 1% of the

dental market

Source: National Association of Dental Plans

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What Do Employers Want?

Better benefits for less money Money is always an issue

DHMO Irony

Network is important - a differentiator– Size– Discounts– Standalone “Best in Class” until outcomes are linked to

medical costs (still waiting)

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Maximizing your PPO Plans Expand your network options

Tiered Fee-For-Service Networks (POS) PPO/EPO PPO/DHMO

Dual-Purpose PPO networks– Free benefits as long as the list of

exclusions and limitations Preventive Plus plans Maximum Allowable Charge plans

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Understanding Dental Networks Golden Age of Dentistry – dentists have the upper

hand Dual-purpose PPOs Network Size: Caveat Emptor Network discounts: fixed vs. percentage Specialist discounts

– Are they different?– Are they included?

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New Types of Plans

Exclusive Provider Organization (EPO) Insured Deeper discounted – smaller network

Self Funding Increasing Predictable and non-catastrophic Direct Reimbursement (“simple” self-funding)

Dental Discount Plans

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New Bells and Whistles

Rollover maximums Family vs. individual maximums Escalating maximums Diagnostic & Preventative maximums Coverage for dental implants Coverage for teeth whitening Coverage for pregnant women

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Dental Plan Opportunities

Everyone should have a network (groups and individuals)– PPO– EPO– DHMO– Discount

Add deeper discounted networks for additional savings EPO or DHMO with a PPO PPO with deeper discounts PPO with discounts for non-covered services

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Dental Plan Opportunities

Use networks that expand coverage without costing more

Direct Reimbursement (“simple” self-funding) Discount Plans

– Sharp & FDH Access

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Conclusions

Dentistry is expensive and getting more expensive – much less than medical but much faster than

inflation Dental health directly impacts overall health The Dental Benefits Industry generally follows the

Medical Industry Every client or prospect has options for improving or

adding a dental benefit

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Conclusions

Options exist for you to save your clients money without taking away benefits– Network enhancements– Plan design modifications– New products

Brokers play an important role in educating their clients and prospects– Health & welfare and savings