States take aim at discount dental plans

As the number of uninsured Americans nears 50 million, more people are turning to discount dental plans for maintenance and fillings. But state regulators have started cracking down on fraudulent discounters.

Some 45 million people in the U.S. are enrolled in discount health plans, most of which offer dental programs, according to the industry trade group Consumer Health Alliance (CHA). Established dental networks include about 50,000 dentists, according to the trade group.

In response to growing patient complaints about false advertising, however, several states are cracking down on fraudulent companies, and some have passed oversight legislation. New regulations for discount plans took effect in January in Massachusetts, and Washington recently passed legislation requiring the companies to be licensed, according to the states' Web sites.

At least 33 states regulate discount health plans, and 21 states require them to be licensed, according to the CHA. California is in the process of writing new licensing regulations after receiving more than 1,000 complaints involving about 160 companies since 2003, according to the state Department of Managed Health Care (DMHC). Of these complaints, 51 were related to dental work and involved 28 discount plans.

Some plans falsely promised members unrestricted access to medical providers, while others sold completely worthless discount cards.

The DMHC has issued cease and desist orders to nine companies offering discount health plans, and seven companies have been ordered to obtain California licenses, including DentalPlans.com, which is based in Plantation, FL, according to the DMHC.

Other states

And California is not alone in its efforts. In early February, Minnesota's attorney general sued two Texas companies for falsely representing their discount health plans as medical insurance. Direct Medical Network Solutions and Association Healthcare Management provide limited discounted medical services through certain doctors and clinics, but their plans are not insurance policies, according to Minnesota Attorney General Lori Swanson.

Neither company was licensed to sell insurance in Minnesota, Swanson said, but the companies used words such as "premium" and "co-pay," and promised to cover 80% of medical expenses from a vast network of hospitals and doctors to persuade 4,600 customers in Minnesota that they were buying an insurance policy, according to an Associated Press story.

And in April 2005, Illinois Attorney General Lisa Madigan sued another Texas company -- HealthCorp International, doing business as International Association of Benefits -- for masquerading as a healthcare insurance provider. Madigan filed suit against the company for allegedly marketing healthcare discount cards that misled consumers into believing they were buying health insurance instead of mere discounted fees on healthcare services -- discounts often not even accepted by providers, according to the attorney general's Web site.

Madigan said her office had received more than 120 complaints from Illinois consumers since January 2002 about companies that masquerade as healthcare insurance providers, with the number of complaints doubling from 2003 to 2004.

What the plans offer

To date, some 6 million California residents have purchased discount health plans, compared to nearly 21 million who get healthcare through HMOs, according to the CHA. Many major health insurers also offer access to discount services.

Delta Dental of California currently has no discount plans, but that may change. "We have an interest in it, and it's a product we're looking at," Jeff Album, vice president of public affairs, told DrBicuspid.com. Individual and very small businesses comprise the last corner of available market share, he noted, and Delta Dental Association has already created pathways for independent Delta affiliates, such as Delta of Oklahoma, to develop discount plans.

So far the California Dental Association (CDA) has received only one complaint about the discount health plans, from a dentist who claimed he had never signed up for the program, policy analyst Greg Alterton told DrBicuspid.com. But there have been calls from people who questioned whether some plans are actually offering a discount, he added.

Tom Limoli Jr., an Atlanta-based insurance consultant, recounted recently seeing a Memphis, TN, home show that featured marketers selling a discount dental plan that offered free exams and prophys.

"When I looked at the list of doctors, it was just a copy of the phone book," he told DrBicuspid.com. "When I saw one of the doctors, I showed it to him and he said, 'I don't know anything about that!' No one is policing them [discount plan companies] to make sure they're licensed or if they're telling the providers the same thing they're telling subscribers."

Some discounters fraudulently market themselves as insurance.

"The important thing is that these plans are not insurance and the word insurance should never be used with them," Album said. "People who purchase this should not expect the type of coverage or benefits associated with dental insurance programs."

Quality vs. price

But the plans are significantly cheaper: Most discount programs cost between $50 and $100 per year, compared to $500 to $1,000 for individual dental insurance, Album noted. And most of the programs offer discounts ranging from 10% to 30%, he said.

Still, "the consumer needs to scale their expectations proportionally," he warned.

Album also noted that patients can frequently negotiate their own discounts with their dentists.

"It's always out-of-pocket expenses that will deter or encourage patients," Alterton said.

So what's in it for dentists to participate in these discount plans?

"They're good for dentists who have open chair time," said Limoli, noting that many dentists have asked him if he thinks the plans are a viable alternative to insured patients.

But, he added, "I tell them any type of plan that reimburses for less than your full fee has to be equated based upon reimbursement for time, not reimbursement for procedures."

In addition, dentists sometimes misconstrue the concept, concluding that they're getting less than the normal reimbursement for procedures. "I tell them, 'No, you're not losing money because you never would have had it in the first place,' " Limoli said. "When doctors start thinking of the value of the write-off, you have to tell them it's a useless number; it doesn't exist."

Discount plans usually offer the same fee schedules as preferred provider organizations (PPOs) but without the time-consuming paperwork required by insurance companies, said Michael S. Grossman, D.D.S., president of New Dental Choice, one of only three discount plans licensed in California. The company also offers PPO coverage.

New Dental Choice has more than 20,000 subscribers and 10,000 participating dentists in 17,000 locations in California, he said. Individual plans cost $8 a month or $10 a month for families, plus a $10 activation fee.

Dr. Grossman said discount dental plans make economic sense for people who only want preventive dentistry, which is what most of his customers use it for.

"When you do the math and figure out the premiums, co-payments, deductibles, maximum allowable amounts, waiting periods, and restricted procedures that pertain to dental insurance, it almost always costs more than a discount health plan," he told DrBicuspid.com. "But people are so insurance-oriented."

Lynne Randolph, spokeswoman for California's DMHC, said some discount plans -- like Dr. Grossman's -- provide bona fide programs. "He very much wants to do the right thing," she told DrBicuspid.com.

Allen Erenbaum, counsel for the CHA, noted that discount plans have been around for years. "Dentists have been using discount programs for 20 years, and established dental networks of 40,000 to 50,000 dentists nationwide have been participating with great success for both dentists and patients," he told DrBicuspid.com. Most plans provide dentists with fee schedules, eliminating the guesswork in terms of how much to charge, he added.

The right patients?

However, dental marketing consultant Richard Geller warns that the type of patients such plans attract may not be the most desirable.

"The trouble is you get emergencies, patients who aren't going to come back reliably and who aren't going to refer high-quality patients," Geller told DrBicuspid.com. "So you have to make money on the very first visit. Many a patient from these plans has left the office with a temporary and an appointment, never to be seen again."

But Dr. Grossman noted that his plan offers a "middle-class product" whose customers often earn up to $100,000 a year.

"If you have a patient without insurance, they can discuss it and the dentist can take a hands-off approach for retaining patients," he told DrBicuspid.com. The only disadvantage is that dentists must collect all the money from patients, Dr. Grossman noted.

And Geller acknowledges that if an office is set up for volume, participating in discount plans can be lucrative for some practices. "Dentists who use associates for many of their procedures can make money with these types of patients," he said.

So in a bad economy, when practices are seeing less business and many people have either lost their insurance or can't afford it, discount plans may have something to offer both dentists and patients.

"It is really to fill empty chairs," Limoli said. "It's another marketing source."

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