November 30, Dear Mr. Sprague: Re: Alberta Dental Fees

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1 November 30, 2015 Mr. Bob Sprague, B.Sc., Pharmacy, MBA Director, Pharmaceuticals and Supplementary Health Benefits Branch Alberta Health Professional Services & Health Benefits Division PO Box 1360 Stn Main Edmonton, Alberta T5J 2N3 Dear Mr. Sprague: Re: Alberta Dental Fees On behalf of the Canadian life and health insurance industry, I am pleased to provide our response to your letter dated October 30, 2015 requesting information related to the identification of cost drivers that could influence dental service fees in the province of Alberta. We understand that you have initiated a review of both private and public dental service fees and seek information from the private dental insurance industry. The Canadian Life and Health Insurance Association established in 1894, is a voluntary association with member companies which account for 99 per cent of Canada's life and health insurance business. In Alberta, at the end of 2014, the life and health insurance industry provided more than 2.6 million Albertans with private dental plan coverage and made payments of about $1.2 billion on dental services. Accordingly, we believe that the private payer market is a critical stakeholder in any dental fee reform initiative. Before providing a response to your specific questions, I'd like to provide some general comments about the impact to the insurance industry of not having a provincial dental fee guide in Alberta. In order for our industry to establish a reasonable and customary (R&C) price for each of the codes used by dental offices in Alberta, we have had to develop our own fee percentile report using previous year data. This report is compiled by the CLHIA as per the steps below and is used by our members to benchmark their own R&C fees in the province. Canadian Life and Health Insurance Association 79 Wellington St. West, Suite 2300 P.O. Box 99, TD South Tower Toronto, Ontario M5K 1G Association canadienne des compagnies d'assurances de personnes 79, rue Wellington Ouest, bureau 2300 CP 99, TD South Tower Toronto (Ontario) M5K 1G Toronto Montréal Ottawa

2 Summary of annual process: CLHIA collects data from members on fees and occurrences of dental codes for previous year CLHIA compiles the data to produce a report that shows, for each code used in the province, the various prices we've observed in the past year expressed as a percentile. Each insurer reviews the report to establish their own reimbursement rates Rates are entered onto our reimbursement systems and activated for adjudication purposes Insurers respond to increased calls regarding fees We would also note that because there is no published fee guide in Alberta, our industry has difficulty determining which new codes have been added or deleted in the course of a year. This process varies significantly from other provinces in Canada, where fee guides are in place. One central point to highlight is that it is employers, or plan sponsors, that ultimately pay for dental insurance programs. Costs are passed on to plan sponsors either directly if their plan is Administrative Services Only (ASO) or through higher premiums if it is insured. In Alberta, our experience shows that rates have grown at an average annual rate of 4.5% between 2005 and 2015 whereas the rest of Canada has seen rates increase at an average annual rate of 2.9% over this same period. In response to your specific questions, we provide the following information. 1. What are the top five factors that influence a dental office determining what service fees to charge patients? Listed below are some of the observations we have regarding fees charged to plan members and dentists in Alberta. Outside Alberta, most dental offices will have a very good idea of the usual and customary rate set by each individual insurer and will set their rates accordingly so that the patient is required to pay as little out-of-pocket as possible. In Alberta, due to the lack of a fee guide, and lack of understanding of what fee level each insurer has established, dentist cannot align their pricing as well and as a result we notice that patients are more frequently out-of-pocket. There are some important differences based on whether a dentist practices in a smaller community or larger city. A dentist in a smaller community with one large employer (a mine, for instance) will likely set their fees at the level of that employer's dental plan. Those in a larger city, however, have less incentive to set rates low as there are plenty of patients. 2

3 It appears that dentists are influenced by other dentists practicing nearby and what they set their fees at. We would note that generally, fees are influenced by time (how long it would take an average practitioner to perform the procedure), responsibility (related to scientific knowledge, professional judgement, technical skill and risk to perform the procedure), cost of overhead, laboratory and, possibly, extra material costs. 2. What are the top five factors that could prevent an Albertan from seeking dental services? This is difficult for us to comment on as we deal generally with those who have private coverage. We would note, however, that Albertans are increasingly seeking lower cost dental treatment outside of Alberta. Sometimes that may be outside the province, or Albertans may choose to seek dental treatment in Mexico, Costa Rica or other 'dental tourism' locations. Most insurance companies will reimburse for treatment provided outside Alberta to an Albertan. 3. Describe to what degree Albertans are knowledgeable about their dental coverage for either their government-sponsored or private insurance plans? We would reiterate that main point is that the lack of a fee guide is confusing for plan members. They may not know before a treatment whether a service is fully covered or not. It may be more difficult for patients to compare fees between different dentists if there is no benchmark. 4. Would a publically published dental fee guide of private insurance dental service fees be a benefit or hindrance to either the Albertan or the dental offices and why? Before responding to your question, we'd like to point out that dental fee guides in other provinces are not publically published today. As a result, consumers do not have access to dental fee guides. There is currently no such things as a 'fee guide of private insurance dental service fees'. Dental Associations develop fee guides for the benefit of their members. These guides are then used by dental offices to determine their fees for their individual practice. Dental offices may set their fees lower than, at or higher than the current fee guide but generally will fall within the suggested range. Dental fee guides are provided as information to insurers who set their own independent reimbursement level in order to adjudicate claims from plan members. While there is some variance by plan, insurers generally follow the established fee guides for adjudication purposes. This assists in managing plan member expectations on coverage. Dental fee guides are generally of benefit to patients as our observation in provinces with a fee guide is that dentists tend to cluster their pricing closely around the suggested fees. (We expand on this point more below in question 7). This may allow for greater 3

4 consumerism as patients/members can understand at what level the dentist sets their fees compared to the benchmark fee guide and make a determination if they are comfortable with that or not. 5. The Alberta Dental Association and College have a dual role of protecting the public through professional standards (College) and supporting the members of the dental profession (Association). Does this dual role influence the service fees dental offices charge in Alberta? If yes, list the reasons why. Many dual role organizations have made the move over the last few decades to split the organization into separate stand-alone Association and separate College. The reasoning is that the College's role of protecting the public cannot be fully aligned with the Association role of representing the dental profession. 6. The Alberta government determines the dental fees for the government sponsored dental plans. What role should the government have regarding a dental fee guide for the publically funded benefit plans, private insurance plans, and cash paying Albertans? Dental fee guides should be established using real parameters reflecting clear economic indicators and possibly involve stakeholder input, such as the private payers. The establishment of dental fee guides does not necessarily mean that cost increases will be mitigated, however. Even where guides exist in Canada, dental fee guide increases over the last number of years have often outstripped inflation and outpaced other benefit plan increases. Our members strongly suggest that the same process be implemented in Alberta as exists in every other province, namely that the dental association issue an annual dental fee guide 7. Are there other issues, supported by information that the Alberta Government needs to consider that could influence dental service fees? As we noted above, the CLHIA establishes an Alberta dental fee percentile report each year based on current year claims. We have attached the 2016 percentile report to our submission for your information. One important observation we would make about the market practices in Alberta vs other provinces is that, generally, where established fee guides exist, the range of dental fees billed above and below the fee median is narrower than what we see in Alberta. The lack of a dental fee guide appears to widen the range of fees billed for each particular code/procedure. We would also note as dental payments continue to rise in Alberta, we are observing a trend towards plan sponsors changing plan design to require more out-of-pocket payments made by employees, through increasing deductibles, lowering maximums or increasing employee co-payment, in order to control their costs. As well, in response to increasing cost pressures on our plan sponsors, insurers are providing more oversight of 4

5 Dental office practices by undertaking dental audit programs in the province of Alberta. While, generally, the purpose of dental audit programs is to confirm that services were delivered as billed, they also serve to recover funds that were inappropriately billed. In closing, we reiterate that we would support a shift in Alberta such that the provincial dental association issues an annual dental fee guide that lists all existing procedure codes and the corresponding suggested rate. This would increase the transparency in prices in the province, reduce some of the variability in prices for patients and will reduce the administrative burden on insurers who operate in the province. In addition, employers in Alberta should experience a decrease in employee inquiries regarding dental costs and plan coverage. Thank you for your attention to this important issue. We would be pleased to discuss this with your officials at their convenience or provide any other information, if you would find it helpful. Please have them contact Joan Weir, Director, Health and Dental Policy at jweir@clhia.ca or Sincerely, Original signed by Stephen Frank Vice President, Policy Development and Health 5