Session 67 L, Dental Insurance Today. Moderator/Presenter: Thomas Daniel Murawski, ASA, MAAA

Transcription

1 Session 67 L, Dental Insurance Today Moderator/Presenter: Thomas Daniel Murawski, ASA, MAAA

2 Dental Insurance Today Thomas Murawski, ASA, MAAA Milliman, Inc 2016 SOA Health Meeting 6/16/16

3 Session Overview This session will cover a range of dental insurance topics, including an industry overview and a discussion of key current issues facing the industry. You will also gain an understanding of how dental actuarial work differs from medical actuarial work due to dental's unique product design and selection risk. At the conclusion of the session, attendees will be able to describe the current marketplace for dental insurance and current industry issues and understand how dental insurance is structured differently from medical insurance. 2

4 Session Overview This session will cover a range of dental insurance topics, including an industry overview and a discussion of key current issues facing the industry. You will also gain an understanding of how dental actuarial work differs from medical actuarial work due to dental's unique product design and selection risk. At the conclusion of the session, attendees will be able to describe the current marketplace for dental insurance and current industry issues and understand how dental insurance is structured differently from medical insurance. HOW DENTAL DIFFERS FROM MEDICAL 3

5 Session Overview This session will cover a range of dental insurance topics, including an industry overview and a discussion of key current issues facing the industry. You will also gain an understanding of how dental actuarial work differs from medical actuarial work due to dental's unique product design and selection risk. At the conclusion of the session, attendees will be able to describe the current marketplace for dental insurance and current industry issues and understand how dental insurance is structured differently from medical insurance. INDUSTRY OVERVIEW 4

6 Session Overview This session will cover a range of dental insurance topics, including an industry overview and a discussion of key current issues facing the industry. You will also gain an understanding of how dental actuarial work differs from medical actuarial work due to dental's unique product design and selection risk. At the conclusion of the session, attendees will be able to describe the current marketplace for dental insurance and current industry issues and understand how dental insurance is structured differently from medical insurance. CURRENT KEY ISSUES (HINT: ACA) 5

7 6 Session Overview

8 Session Overview This session will cover a range of dental insurance topics, including an industry overview and a discussion of key current issues facing the industry. You will also gain an understanding of how dental actuarial work differs from medical actuarial work due to dental's unique product design and selection risk. At the conclusion of the session, attendees will be able to describe the current marketplace for dental insurance and current industry issues and understand how dental insurance is structured differently from medical insurance. CURRENT KEY ISSUES (HINT: ACA) 7

9 8 HOW DENTAL DIFFERS FROM MEDICAL

10 Basic Components of Dental Plan Design Dental insurance is different from medical insurance: Designed to emphasize preventive care over catastrophic coverage Elective nature of many dental benefits compared to medical Often sold on voluntary basis Cost sharing designed to limit adverse selection Substantial out-of-pocket cost and benefit limits to control utilization Benefits divided into class structure 9

11 Classes of Dental Benefits Class I Preventive and Diagnostic Oral Exams, X-Rays, Cleanings, Fluoride, Sealants Class II Basic Fillings, Endodontics, Periodontics, Extractions Class III Major Inlays, Onlays, Crowns, Bridges, Dentures Class IV Orthodontics Sometimes excluded, or included just for children 10

12 Common Plan Designs (Pre-ACA) Coinsurance Common Plan Coinsurance Structure by class- 100%/80%/50%/50% Deductible May be waived for certain services (e.g. Class I) Annual Benefit Maximum Industry standard on employer-sponsored plans Often separate annual or lifetime max for orthodontia OOP Maximums Rarely found in dental policies 11

13 Adverse Selection in Dental Relationship between risk and purchasing behavior Many dental benefits are elective, especially Class II and Class III benefits Immediate coverage of these benefits creates large opportunity for adverse selection Important to construct product design to mitigate adverse selection 12 April 28, 2015

14 Avoiding Adverse Selection Waiting periods The amount of time immediately following the member s effective date for which the plan does not reimburse expenses for specified services Placement of certain services in Class II versus Class III Endodontics, Periodontics and Oral Surgery may be covered as Class II or Class III services Progressive Benefits Increase in coinsurance levels in years 2+ Annual Benefit Maximums Limits coverage of expensive benefits such as implants and dentures Benefit Exclusions Missing tooth 13 April 28, 2015

15 Waiting Periods Not common for group policies Very common for Individual policies Waiting periods may be waived by meeting prior coverage requirements Waiting periods often vary by benefit class Class I typically no waiting period (immediate coverage of preventive services) Class II no waiting or 3, 6, 12 month waiting periods Class III no waiting or 3, 6, 12, 18 month waiting periods Orthodontia 12 months typical, FEDVIP up to 24 months Some states have restrictions, for ACA and/or non-aca plans 14 April 28, 2015

16 Selection and Durational Loss Ratios Only a mature block of stand-alone dental business will have stable loss ratios New policy form with waiting periods 1 st year claims lower than lifetime target loss ratio 2 nd year claims might be higher than lifetime target loss ratio Example: Pent-up demand with a 12 month Class III waiting period New policy form without waiting periods 1 st year claims much higher than lifetime target loss ratio due to adverse selection Cumulative loss ratio higher than lifetime loss ratio for several years depending upon multi-year pricing model Could present cash flow issues for insurer 15 April 28, 2015

17 Loss Ratios No nationwide standard minimum loss ratio requirement for dental Minimum requirements vary state by state Dental loss ratios are usually lower than medical policies Lower overall premium levels 16 April 28, 2015

18 Claims Cost Differences Distribution of Charges Dental claims have much lower volatility than medical claims Zero Bucket Dental 35% Even with focus on Preventive and Diagnostic care Medical - 5% 17 April 28, 2015

19 Claims Cost Differences Distribution of Charges 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% Distribution of Billed Charges 0% Dental Medical *Only 75% of medical distribution shown 18 April 28, 2015

20 Claims Cost Differences Medical vs Dental, Adult vs Child Differences in Cost: Child vs Adult, Medical vs Dental Child Adult Medical Dental Member Dental Child Claims High Frequency, Low Severity Dental Adult Claims Low Frequency, High Severity Ortho could change the relationship shown 19 April 28, 2015

21 Dental Data 20 April 28, 2015

22 Dental Data - Composition Dental procedure codes follow a uniform code type ADA Codes CDT Codes - D Codes DXXXX Hundreds of different codes % Of Total Cost Number of Codes 50% 90% 95% 21 April 28, 2015

23 Dental Data - Composition Dental procedure codes follow a uniform code type ADA Codes CDT Codes - D Codes DXXXX Hundreds of different codes % Of Total Cost Number of Codes 50% 10 90% 95% 22 April 28, 2015

24 Dental Data - Composition Dental procedure codes follow a uniform code type ADA Codes CDT Codes - D Codes DXXXX Hundreds of different codes % Of Total Cost Number of Codes 50% 10 90% 40 95% 23 April 28, 2015

25 Dental Data - Composition Dental procedure codes follow a uniform code type ADA Codes CDT Codes - D Codes DXXXX Hundreds of different codes % Of Total Cost Number of Codes 50% 10 90% 40 95% April 28, 2015

26 Dental Data Top 20 Codes By Billed Charges PMPM, Sorted by Code Description Periodic oral evaluation - established patient Limited oral evaluation - problem focused Comprehensive oral evaluation - new or established patient Intraoral - complete series of radiographic images Bitewings - four radiographic images Panoramic radiographic image Prophylaxis - adult Prophylaxis - child Resin-based composite - one surface, posterior Resin-based composite - two surfaces, posterior Resin-based composite - three surfaces, posterior Crown - porcelain/ceramic substrate Crown - porcelain fused to high noble metal Crown - porcelain fused to predominantly base metal Crown - porcelain fused to noble metal Endodontic therapy, molar (excluding final restoration) Periodontal scaling and root planing - four or more teeth per quadrant Periodontal maintenance Extraction, erupted tooth or exposed root Surgical removal of erupted tooth Category I-Oral Evaluations I-Oral Evaluations I-Oral Evaluations I-X-Rays I-X-Rays I-X-Rays I-Prophylaxis I-Prophylaxis II-Restorations II-Restorations II-Restorations III-Inlays/Onlays/Crowns III-Inlays/Onlays/Crowns III-Inlays/Onlays/Crowns III-Inlays/Onlays/Crowns II-Endodontics II-Periodontics II-Periodontics II-Simple Extractions II-Surgical Extractions 25 April 28, 2015

27 26 INDUSTRY OVERVIEW

28 Enrollment Trends Source: NADP

29 Enrollment Trends - Commercial Source: NADP

30 Enrollment Trends - Commercial Source: NADP

31 Enrollment Trends ASO vs Fully Insured Source: NADP

32 Enrollment Trends Benefit Sources and Funding Minimum participation % is important 31

33 Enrollment Trends Benefit Sources and Funding 32

34 Enrollment Trends Likelihood of Dental Benefit Offering by Group Size Source: NADP

35 Benefit Trends Annual Benefit Maximum Source: NADP

36 Benefit Trends Deductible Source: NADP

37 Administrative Trends Claims Processing Source: NADP

38 37 CURRENT KEY ISSUES: ACA

39 How Dental Insurance Is Purchased (Pre-ACA) Only 1% of dental policies are individual policies Virtually all dental policies obtained via employer, union, or public program Usually a family policy covering employees and dependents 98% of Americans with dental coverage have dental as a separate policy from medical coverage Only 2% have dental coverage embedded in medical plan Source: Offering Dental Benefits in Health Exchanges. NADP/DDPA September

40 ACA: Pediatric Dental Essential Health Benefit ACA defined minimum essential health benefit package (EHBP) required in individual and small group markets Pediatric oral health services is one of the named EHBs Adult dental is NOT an EHB Pre-ACA Group Coverage Family Coverage Separate from Medical ACA Individual Coverage Pediatric and Adult Coverage Separate or Embedded 39

41 What is the Pediatric Dental EHB? States charged with defining benchmark plans for EHB Rules for pediatric dental benefit benchmarking: Medical benchmark includes pediatric dental -> all set Otherwise, benchmark must be supplemented with: State s CHIP pediatric dental services Federal Employee Dental and Vision (FEDVIP) pediatric dental services Dental EHB Benchmark Number of States FEDVIP 25 CHIP 24 Dental Benefit in Medical EHB 1 Source: National Association of Dental Plans. October

42 What is the Pediatric Dental EHB? States charged with defining benchmark plan for EHB All of the benchmarks provide comprehensive pediatric dental coverage of preventive/diagnostic, basic, and major services Almost all states cover orthodontia when medically necessary Benchmarks are being revisited for 2017 policy year 41 September 30, 2015

43 Pediatric Dental EHB on Exchanges May be embedded in medical or sold by standalone dental plan (SADP) 2015 exceptions: Alaska, California, Vermont, West Virginia, Washington DC all QHPs embedded Standalone dental product could be a pediatric EHB-only plan or a family dental plan with EHB included Required offer, not required purchase Except for states listed above Nevada was required purchase in 2014, now required offer 42 September 30, 2015

44 Pediatric Dental EHB Off Exchanges Equitable Treatment issue ACA says that off exchange, medical carriers must offer all 10 EHBs If medical issuer is reasonably assured that pediatric dental EHB has been obtained via Exchange-certified standalone dental plan, need not offer the benefit in medical plan Pediatric dental EHB can come from medical carrier or SADP Some states have provided guidance on how reasonable assurance and exchange certification are defined 43 September 30, 2015

45 Pediatric Dental EHB Product/Pricing Pre-ACA ACA Group Coverage Family Coverage Annual Benefit Maximum Orthodontia with Lifetime Maximum Standalone Dental Individual Coverage Pediatric and Adult Purchase May Be Separate No Annual Benefit Maximum Medically Necessary Orthodontia Actuarial Value Out-of-Pocket Maximum Standalone v. Embedded 44 September 30, 2015

46 Pediatric Dental Actuarial Value Standalone Dental Plan High (85%) or Low (70%) AV for pediatric dental EHB No standard methodology; carriers have actuary certify Must adjust cost sharing to comply with AV Fairly similar plan designs across carriers Embedded in Medical Plan No specific AV requirement for pediatric dental EHB component Plan AV calculated with HHS standard calculator Changes to pediatric dental benefits do not affect overall plan AV Wide variance in pediatric dental benefit richness 45 September 30, 2015

47 Pediatric Dental OOP Maximum Standalone Dental Plan Embedded in Medical Plan $350/$700 OOPM for 2016 Pediatric dental subject to overall plan OOPM ($6,600/$13,200) After OOPM achieved, plan pays 100% of dental cost for remainder of year Example: child needing orthodontic treatment costing $3, September 30, 2015

48 2015 Exchange Participation Source: NADP

49 Standalone v. Embedded Dental EHB Actuarial Value OOP Max Price Point and Benefits Admin Costs Adverse Selection 49 September 30, 2015

50 SADP versus Embedded EHB ADA Health Policy Institute Research Brief February 2015 Key Findings: Upward trend in share of medical plans with embedded pediatric dental benefits on exchanges Embedded more likely than SADP to offer first dollar coverage for preventive dental services Less expensive to purchase pediatric dental coverage via embedded plan Upward trend in number of SADPs offering family dental 50 September 30, 2015

51 SADP versus Embedded EHB Upward trend in share of medical plans with embedded pediatric dental benefits on exchanges Across 40 states studied: 35.7% in 2015 v. 26.8% in 2014 Embedded pediatric dental characteristics: Embedded Plan Pediatric Dental Deductible % of Plans Medical Deductible, Waived for Preventive Dental Services 65.5% Medical Deductible, Not Waived for Preventive Dental Services 23.8% Separate Dental Deductible, Waived for Preventive Dental Services 4.7% No Deductible, First Dollar Preventive Dental Coverage 5.5% No Deductible, Non-First-Dollar Preventive Dental Coverage 0.5% Source: More Dental Benefits Options in 2015 Health Insurance Marketplaces. ADA Health Policy Institute, February September 30, 2015

52 SADP versus Embedded EHB Embedded more likely than SA to offer first dollar coverage for preventive dental services Standalone plan characteristics: SADP Pediatric Preventive Dental Cost Sharing % of Plans Deductible waived for preventive services 39.6% Deductible not waived for preventive services 43.1% No deductible; first dollar preventive coverage 4.3% No deductible; non-first-dollar preventive coverage 13.0% 75.7% of embedded plans offer first dollar preventive dental compared to 43.9% of standalone plans Source: More Dental Benefits Options in 2015 Health Insurance Marketplaces. ADA Health Policy Institute, February September 30, 2015

53 SADP versus Embedded EHB Less expensive to purchase pediatric dental coverage via embedded plan Pediatric Dental Plan Type 2015 Monthly Per Member Premium or Shadow Premium Embedded $16.21 Standalone 70% AV $27.61 Standalone 85% AV $35.95 Source: More Dental Benefits Options in 2015 Health Insurance Marketplaces. ADA Health Policy Institute, February September 30, 2015

54 SADP versus Embedded EHB Why are embedded plans able to offer seemingly better coverage at a lower cost than SADPs? Cost spread over all members rather than per child SADPs must contend with: $350/$700 OOPM Actuarial Value requirements Benefit plan ramifications of meeting OOPM and AV requirements Recouping admin costs over lower premium base Coverage for non-routine services likely better under SADPs but that is not as obvious and impacts far fewer children 54 September 30, 2015

55 SADP versus Embedded EHB Upward trend in proportion of SADPs offering family dental 2014: 42.0% of SADPs were child-only, 58.0% family 2015: 29.6% of SADPs child-only, 70.4% family Source: More Dental Benefits Options in 2015 Health Insurance Marketplaces. ADA Health Policy Institute, February September 30, 2015

56 Medically Necessary Orthodontia (MNO) Today s commercial dental policies little to no MN criteria Most states EHBs include MNO MN criteria will vary by state and/or carrier List of qualifying conditions Score on malocclusion index Price impact is not negligible, especially with no benefit maximum and with an OOP maximum 56

57 Pediatric Dental Pricing: A Balancing Act Actuarial Value requirements Low OOP maximum No annual or lifetime maximums Maintain preventive coverage Affordability Rules still changing 58

58 ACA Application to SADPs Standalone dental is excepted benefit under the ACA 3 Rs -- Do not apply Advance Premium Tax Credit If $ left over after purchasing QHP, remaining funds can be used for standalone pediatric dental EHB APTC calculation includes pediatric dental ONLY if 2 nd lowest cost Silver plan has embedded dental No subsidy for adult dental Cost Sharing Reductions Only apply for embedded pediatric dental with combined costsharing (deductible, OOP maximum) 59

59 ACA Application to SADPs, cont. Health Insurer Fee (HIT/Section 9010 Tax) Does apply; dental insurers are issuers Rating Rules (b): standalone dental issuers not subject to fair health insurance premium rules, not required to develop rates under same limitations as QHPs However, it makes sense to align standalone dental plan rates with the structure of medical rates Exchange systems for data collection from carriers Exchange user portals Consumer understanding 60

60 61 CURRENT KEY ISSUES: MEDICAID

61 Medicaid Dental Landscape Children / CHIP Mandatory Comprehensive Benefit Dental Coverage by Medicaid Population Traditional Adult Medicaid Populations No minimum requirements Dental benefits for adults range from no coverage to emergency only to comprehensive 46 states and Washington DC offer some level of dental benefit to Medicaid-enrolled adults Adult dental benefits can vary by population type such as pregnant women, disabled, elderly and all other Source: 62 September 30, 2015

62 Medicaid Dental Landscape Medicaid Adult Dental Benefits Emergency Only Relief of pain under defined emergency situations (e.g., uncontrolled bleeding, traumatic injury, etc.) Limited Fewer than 100 diagnostic, preventive, and minor restorative procedures recognized by the American Dental Association (ADA); perperson annual expenditure cap is $1,000 or less Comprehensive A mix of services, including more than 100 diagnostic, preventive, and minor and major restorative procedures approved by the ADA; perperson annual expenditure cap is at least $1,000 Source: 63 September 30, 2015

63 Medicaid Dental Landscape Dental Coverage by State for Traditional Adult Medicaid Population 15 states cover emergency dental only FL, GA, HI, ME, MD, MS, MO, MT, NV, NH, OK, TX, UT, WV, ID 17 states cover limited dental benefits AR, CO, DC, IL, IN, KS, KY, LA, MI, MN, NE, PA, SC, SD, VT, VA, WY 15 states offer comprehensive dental AK, CA, CT, IA, MA, NJ, NM, NY, NC, ND, OH, OR, RI, WA, WI No adult dental benefits AL, AZ, DE, TN Source: 64 September 30, 2015

64 Medicaid Dental Landscape Adult Medicaid dental benefits are frequently changing on a state by state basis Coverage decisions tend to be significantly tied to financial conditions of the state and correspond to budget cycles In the years following 2008, with the recession, several states began to reduce or eliminate adult dental benefits Recently, many states are moving to enhance or reintroduce dental coverage for Medicaid adults 65 September 30, 2015

65 Medicaid Dental Landscape Recent Enhancements to Adult Medicaid Dental Benefits California Restored adult dental coverage (May 1, 2014) Colorado Added adult dental coverage (April 1, 2014) Illinois Restored adult dental coverage (July 1, 2014) Minnesota Expanded adult dental services (July 1, 2013) South Carolina Reinstated adult emergency dental (April 1, 2014); Added preventive dental benefits with $750 annual max (July 1, 2014) Vermont Increased dental cap from $495 to $510 (January 1, 2014) Washington Restored adult dental coverage (January 1, 2014) Source: 66 September 30, 2015

66 Medicaid Expansion Patient Protection and Affordable Care Act (ACA) Medicaid Expansion Overview ACA prescribed expansion of Medicaid coverage for adults up to 138% of federal poverty level (FPL) US Supreme Court ruled that Medicaid expansion was at the option of each state Currently 29 Medicaid expansion states, plus DC Useful resource for tracking current status of Medicaid expansion by state 67 September 30, 2015

67 Enrollment Observations Medicaid Expansion Among states that had implemented Medicaid expansion and were covering newly eligible adults in June 2015, Medicaid and CHIP enrollment rose by approximately 29.7% compared to the July-September 2013 baseline period. 1 States that have not, to date, expanded Medicaid reported an increase of approximately 9.8% over the same period. 1 The potential coverage expansion is significant, with up to 8.3 million adults gaining some form of dental benefits coverage through Medicaid September 30, 2015

68 Concerns and Considerations Access Issues A limited % of dentists nationwide accept Medicaid Administrative requirements Missed appointments Long payment wait times Low reimbursement rates In most states that cover adult Medicaid dental services, Medicaid reimbursement rates are less than half of commercial reimbursement rates Both Medicaid expansion and low cost exchange products have exacerbated access issues 72 September 30, 2015

69 75 CURRENT/FUTURE KEY ISSUES

70 Dental Industry Emerging Issues Loss Ratio Requirements Potential for innovation Use of mid-level providers/dental hygienists Embedded plans Connections between oral health and overall health Provider consolidation Narrow Networks What else? 76 April 28, 2015

71 Questions Contact

72 Caveats and Limitations I, Thomas Murawski am an Associate Actuary for Milliman. I am a member of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. Milliman has prepared this presentation for the specific purpose of providing commentary on the impact of the Affordable Care Act on the dental benefits industry. This information may not be appropriate, and should not be used, for any other purpose. No portion of this presentation may be provided to any other party without Milliman's prior written consent. Milliman does not intend to benefit or create a legal duty to any third party recipient of its work even if we permit the distribution of our work product to such third party. Milliman does not provide legal advice, and recommends that the SOA consult with its legal advisors regarding legal matters. 78 September 30, 2015