a me r i c a s Most Trusted D e n t a l l P a n America s Oral Health The State of Dental Benefits
Compiled and published by Delta Dental Plans Association, this report cites data from industry and government sources to offer a current portrait of the dental benefits market. Overall, growing enrollment, upward revenue trends and employers strong reliance on consultants demonstrate significant opportunities. We recognize, however, that the outcomes of health care reform hold the potential to radically alter the landscape. The statistics presented, as such, represent an accurate view of the state of the dental benefits market at the time of publication and you can rely on Delta Dental to continue to monitor the impact of health care reform and provide updated information as it becomes relevant. Regardless, we re confident that the overall value placed on dental benefits will remain strong as consumers continue to recognize the important role such benefits serve in maintaining good oral health. 2
The Benefits Market Percentage of U.S. Population With Dental Benefits ı Enrollment Trends Either through an employer-sponsored group plan, other group plan or individual plan, nearly ı76 million Americans approximately 57 percent of the population of the United States are covered by some form of dental benefit. Overall, this represents a ı.3 percent increase in national enrollment levels from the previous year. ı 43% Not Covered 57% Covered DPPO plans continue to add lives topping ı00 million enrollees for the first time in 2008 with enrollment increasing by 6.2 percent. ı and products continue to experience declining commercial enrollment losing 3.6 and ı5 percent, respectively, in 2008. ı Discount Dental plans remain a relatively low priority for most group dental benefits carriers and commercial enrollment declined by 2.ı percent from last year s estimates. ı Direct Reimbursement plans exhibited no enrollment growth last year following a dramatic increase in enrollment of 9.4 percent the year prior. ı Commercial Dental Enrollment By Plan Type ı ı00 Enrollees (in Millions) 75 50 25 23,657,38ı 60,735,602 58,87ı,567 ıı,308,435 64,959,542 54,ı74,247 23,482,4ı5 ıı,928,664 69,702,507 5ı,039,2ı7 23,635,959 ıı,56ı,592 23,ı93,60ı 80,ı73,803 40,802,723 ı5,ıı6,370 ı4,856,855 80,308,605 33,538,38ı ı3,737,96ı ı3,820,947 9ı,7ı8,0ı2 28,5ı8,874 ı2,683,830 ı3,ı2ı,83ı 95,556,897 26,0ıı,068 ı5,554,465 ı2,644,357 ı0ı,504,708 22,ıı6,7ıı ı5,222,239 200ı 2002 2003 2004 2005 2006 2007 2008 Year of Enrollment Dental HMO Dental PPO Dental Discount Dental 3
Commercial Dental Benefits By Plan Type ı Market Share 7% 8% 7% 9% ı0% 9% ı0% ı0% Overall, DDPO plans continue to lead with a 66 percent share 38% 35% 33% 25% 23% ı9% ı7% ı4% of the total benefits market an approximate increase of 3 percentage points from last year, attributable 39% 42% 45% 50% 56% 62% 63% 66% to declining market shares for both and Dental plans. ı ı5% ı5% ı5% ı4% ı0% 9% 9% 8% 200ı 2002 2003 2004 2005 2006 2007 2008 DPPO Dental Discount Dental Direct Reimbursement Policy Structure ı 2% ı0% 4% 5% 2% ı3% Policy Structure Group plans remain the norm. Among the dental insured 85% 97% 94% 87% population inclusive of, DPPO and Dental plans, less than 3 percent of total enrollees have their benefits through individual policies. ı DPPO Dental Discount Group Individual Riders Other 2008 New Sales Revenue by Group Size 2 Group Sizes While new sales were to be found in all sizes of groups, the three segments together comprising ı0 499 lives accounted for more than 50 percent of all new sales. 2 While the largest groups (25,000+ lives) continued to represent approximately the same portion of total in-force revenue (ı0.5 percent) as they did two years ago (ı0.6 percent), groups this size accounted for only 2.9 percent of total new sales revenue in 2008 a decline from 7.3 percent in 2006. 2, 3 8.8% 3,000 to 9,999 lives ı2. ı,000 to 2,999 lives 4.7% ı0,000 to ı4,999 lives ı2.0% 500 to 999 lives 4.0% ı5,000 to 24,999 lives 2.9% 25,000+ lives 4.3% 2 to 9 lives ı3.7% 200 to 499 lives ı6.3% ı0 to 49 lives 2ı.2% 50 to ı99 lives 4
Group Policy Funding ı Policy Funding For the majority of group dental benefit 20% ı4% 35% 37% plans across all types (, DPPO, Dental and Discount), the employer and employee share the costs of premiums and fees. 58% 6 However, fully employer-funded policies showed an increase from two years for both and 58% 63% DDPO plans up from ı4 to 22 percent () and from 20 to 25 percent (DDPO). 4, ı 22% 25% 6% 8% DPPO Dental Discount Employer Paid Shared Employee Paid Prevalance of Stand-Alone Dental Coverage ı 97% Separate Dental Coverage Policy Providers More than 97 percent of all private group dental benefit policies are purchased separately from medical coverage demonstrating that bundling continues to be an exception to the norm within the U.S. dental benefits market. 3% Dental Coverage Bundled with Medical 5
Group Dental Revenue & Sales The charts below show New Lives, In-Force Lives, New Sales and In-Force Premiums as distributed among plan types illustrating that DPPO plans continued to dominate the market in 2008 both in terms of total enrollees and sales revenue. 2008 Market Growth Highlights 2 New Sales Lives Change vs. 2006 Total In-Force Lives Industry ı5.7 million Increased ı.7% ı7ı.6 million Change vs. 2006 Increased 2.8% New Revenue $3.0 billion Change vs. 2006 Increased 2.0% Total In-Force Revenue $22.4 billion Change vs. 2006 Increased 5.8% *includes Direct Premiums and ASO Fees, but excludes premium equivalents 2.2% Voluntary ı4.0% Voluntary PPO ı.3% Voluntary 0.3% Access 2.9% Voluntary 8.4% Voluntary PPO ı.7% Voluntary 2.4% Access 4.4% 55.4% PPO 7.2% 49.2% PPO 23.0% 28.2% 2008 New Sales Lives 2 2008 Total In-Force Lives 2 2.9% Voluntary ıı. Voluntary PPO 0.8% Voluntary 3.3% Voluntary ı2.5% Voluntary PPO 0.8% Voluntary 5.2% 58.8% PPO 6.0% 49.2% PPO 2ı.2% 28.2% 2008 New Sales Revenue 2 2008 Total In-Force Revenue 2 6
Growth Trends and Group Dental Market Size While new lives grew in 2008 after a dip in 2007, total in-force lives continue to display steady growth. New sales revenue and in-force premiums maintain their consistent upward trends. New Sales Lives 2 Total In-Force Lives 2 In Millions ı8 ı6 ı4 ı2 ı0 ı5.0ı ı6.6ı ı5.47 3 year CAGR = ı.57% ı5.73 In Millions ı80 ı70 ı60 ı50 ı40 ı60.57 ı64.39 ı66.70 3 year CAGR = 2.25% ı7ı.60 2005 2006 2007 2008 2005 2006 2007 2008 New Revenue 2 Total In-Force Revenue 2 $3.5 $30 In Billions $3.0 $2.5 $2.50 $2.79 $2.95 $3.00 In Billions $20 $ı8.84 $20.2ı $2ı.ı3 $22.37 $2.0 $ı.5 3 year CAGR = 6.3% $ı0 3 year CAGR = 6. 2005 2006 2007 2008 2005 2006 2007 2008 7
Trends To Watch Key Coverage & Features The NADP reports that, beyond comprehensive benefits, more than 70 percent of all employers cited the following specific features they focus on when evaluating a dental benefits plan: dental implants, adult orthodontia, enhanced benefits for certain medical conditions, benefit rollovers and sealants. 5 The latter comes as no surprise, given that 30 percent of children ages 6 ıı and 38 percent of adolescents ages ı2 ı9 have dental sealants. 6 Contribution Strategies Recognizing the value dental coverage adds to a competitive benefits package and faced with economic pressures, employee benefits decision makers may explore new options, including considering alternative plan designs and passing along more cost to employees. According to the NADP, about 28 percent of companies plan to increase the portion of the premium paid by their employees, while ı5 percent plan to transition to voluntary plans as a means to ensure their employees continue to receive this essential benefit. 7 Price Transparency Increasingly accurate reporting will continue to remain high on the list of benefits decision makers demands. This gives stand-alone dental benefits carriers an advantage, as the manner in which premiums are spent can be difficult to track separately within bundled medical and dental programs. Active Cost Management Employers continue to explore efforts that encourage employees to engage in behaviors that help keep costs down. This includes covering ı00 percent of preventive care with no deductible, thus motivating employees to treat minor problems before they lead to expensive treatments. And with claims costs accounting for 90 percent of the employer expense, self-funded groups can benefit from efforts that remind employees to choose an in-network dentist. Employee Involvement As employers continue to shift a higher portion of the benefit cost, employees are likely to gain more influence over the benefit decision-making process when it comes to selecting a dental benefits carrier. Health Care Reform Over the next several years, health care reform promises to impact the dental benefits market in a number of significant ways. A few of these possible outcomes include: modifying the way employers structure and fund their employee benefits packages; changing the way small employers approach their dental benefits offering; giving employees more choice over their providers; and introducing more individual consumers into the marketplace. 8
Selecting A Dental Plan 8 8% Use a Consultant 8% Direct 2% Other Technology Utilization Key areas of technology support focus on employee and provider services regarding billing and payment, claims, enrollment and communication. Dental carriers continue efforts geared toward improving utilization of their online services across all constituencies to enhance customer service, provide greater flexibility and improve their operating efficiency and cost structure. Broker Reliance When selecting a dental benefits plan, 90 percent of benefits decision makers rely on brokers or consultants. Among groups that recently switched carriers, a majority of benefits decision makers (62 percent) report bidding annually. 8 20% Every Two Years ı2% Every Three Years Bid Frequency 8 6% Other 82% Use a Broker 62% Annually Evidence-Based Dentistry Active research continues to examine the effects of oral health on various systemic medical conditions and research conducted by the U.S. Surgeon General indicates there are correlations between periodontal disease and health care costs for certain medical conditions. 9
Individual Coverage While individual coverage currently only accounts for less than 3 percent of total dental benefits enrollment, dental carriers are recognizing that many Americans may find themselves in need of a viable dental benefit option as they retire. By anticipating the needs of their customer base and developing these types of plans now, carriers can better prepare themselves to service this soon-to-be-growing population and others with an affordable alternative to group dental benefits. Oral Health Knowledge Growing knowledge of the importance of oral health for its own sake and its effects on overall health will increase the perceived value of dental benefits because of their preventive model and the access to affordable dental care they provide. Closing the knowledge gap exhibited by some employee benefits decision makers and helping them educate their employees about the importance of oral health should create opportunities to further increase plan utilization and enhance their perceptions of the value of standalone dental benefits. 5% Indifferent Somewhat Disagree Somewhat Disagree 4% Indifferent 5% Strongly Disagree 30% Somewhat Agree 64% Strongly Agree 2 Somewhat Agree 68% Strongly Agree Oral Health Affects Overall Health 9 (Among Benefit Decision Makers) Oral Health Affects Overall Health ı0 (Among Consumers) ı0
Since ı954, Delta Dental has been working hard to improve oral health in our country by developing relationships that emphasize prevention and positive oral health care results over the long term. We pursue our mission by increasing access to benefits, offering the largest national network of dentists, adding innovative new plan features, aggressively working to keep costs down, and supporting philanthropic programs that encourage better overall oral health. As the first company to specialize in dental benefits, we remain passionate about oral health and its importance to future generations and we strive daily to make dental care more accessible to everybody. www.deltadental.com Sources ı NADP/DDPA Joint Dental Benefits Report: Enrollment, June 2009. 2 IBIS Associates, 2008 Group Dental Insurance Market Overview, December 2009. 3 IBIS Associates, 2006 Group Dental Insurance Market Overview, October 2007. 4 NADP/DDPA Joint Dental Benefits Report: Enrollment 2007, August 2007. 5 Employee Benefit News, Merging Past and Progressive, April ı, 2009. 6 CDC Trends in Oral Health Status: United States, ı988 ı994 and ı999 2004, 2007. 7 Atlanta Business Chronicle, Dental is a low cost necessity to attract talent, March ı9, 2009. 8 The Long Group Brand Selection Study, August 2009. 9 The Long Group Brand Awareness and Perception Study, October 2008. ı0 The Long Group Consumer Survey, April 2008. Note: Due to rounding, not all charts may add up to 100 percent. 4/20ı0