Two years ago an employer survey found that 58 percent of businesses said they’re willing to drop dental and vision insurance if they need the money to go toward medical.

And, let's admit, it makes sense — employees appreciate these benefits, but nobody lost their house because they didn't have dental or vision insurance.

Two years have passed since that survey and it's playing out as predicted. Medical inflation and the Patient Protection and Affordable Care Act will continue to drive up costs, which will bleed premiums from traditional dental and vision products. Now is a perfect time to consider cross-selling a different version of dental and vision products: discount networks.

But I’m not saying you should drop insurance products for discount products. Rather, I’m saying, many of your clients are dropping dental and vision insurance. When that happens, what's your transition product?

Most of you probably have one of two answers…

I got nothin’
I’d sell voluntary

Let's consider these responses, then dive into some common questions.

Answer No. 1: ‘I got nothin’’ is not an answer:

The time is gone when you can just ignore ancillary needs in a group.

Answer No. 2: Voluntary's just part of it

When offered voluntary dental or vision products, a large percentage of employees aren't willing to pay the premiums. The same people who so appreciated dental and vision benefits when paid for by their employer start calculating the premium vs. benefit and it may not be the right product for them.

Even at 30 percent penetration within a group, a whopping 70 percent of employees went uninsured. It doesn't mean they don't have dental/vision needs—it means 70 percent didn't think the tradeoff was worth it. So, is there another way to serve all employees?

Why discount plans?

Networks are a fraction of the cost of insured plans, so they can be installed at the employer level for all employees. It helps alleviate the shock of full retail prices.
An interesting factoid for the business-minded reader: commissions tend to be much higher on discount products, so you may actually make as much as you did on the fully-insured products.
If you answered “I got nothin’” above, a non-voluntary group discount plan is easier for you to learn and install than selling voluntary.
If you answered “I’d sell voluntary” above, you have options:
Some groups are best served with a non-voluntary discount plan.
Some groups need a non-voluntary discount plan, but you’ll still sell voluntary insured dental/vision plans to the people who see value with these.
Some groups need a non-voluntary discount plan, then you’ll focus your voluntary sales on other products (disability, critical illness, etc.)

How they work

It's all about driving traffic. Dental and vision providers are willing to give substantial discounts to organizations that have large populations of clients they’ll refer to them. We’re used to seeing this as part of an insurance plan.

It takes a lot of investment to build a network: meeting all the providers, writing contracts with them, training their staff, building systems to track them, and so on.

Some of the carriers who build these networks are willing to share that network with other organizations — for a price because it helps them pay for the cost of maintaining the network.

This ain't no wimpy coupon. It's a solid, negotiated reduction in cost. The member will still have to pay out-of-pocket, but by showing their card, they receive the same reduced price the parent network would pay.

Can these be used with HSA/HRA/FSAs?

Absolutely. When used to purchase qualified-expense items (glasses, braces, etc), these discounts can make member funds go much further.

Do these coordinate with insurance?

Members don't get to double-dip on discounts. However, on indemnity plans, it can help to bring down the overall cost of the bill.

Can this be paid for with Section 125 pre-tax dollars?

No. These are non-insurance products and need to be paid with post-tax dollars.

Can these plans be sold as voluntary?

Yes, this is an option with most plans. There aren't usually participation rules, so it can make for a simple installation.

How do I know if it's a good plan?

Always judge a good discount plan based on these two questions:

How wide is the network?

A network doesn't need to include all the providers in the country, but it does need to have solid offerings within a reasonable distance of most clients. Know what your members need (regional, multi-state or national). Understand smaller communities don't lend themselves to significant network savings, because the providers don't need help getting clients. Also consider the types of specialties for dental (general, ortho, endo, perio, pediatric, oral surgeons, etc), and vision (eyewear, opticians/ophthalmologists, LASIK surgeons, contacts, etc.).
How deep is the discount? The depth of discounts is a function of how much additional business is being driven to a given provider. The discount will often be stated as a top-level (i.e. “up to 60 percent savings”) or as a range (i.e. “20-60 percent savings”). The range is most popular as different specialists and different products usually carry different levels of discounts within a network. However, you should focus on the average discount. If a discount plan claims “5-50 percent savings” but the average is 15 percent, that's much less valuable than an average of 35 percent. Many networks may not want to give you this number, but it's necessary to consider when making a decision. The better discount plans are able to negotiate average discounts of 30 percent or better.

What Types of Plans are There?

You’ll often find discount plans with a few bundled networks. A couple categories:

No-cost discount plans: Some networks will give away their network pricing if they see value in adding huge volumes of people to their customer base. The increase allows the plan to negotiate better pricing for the whole. These cards are very viable in associations, affinity groups or other organizations that are not able/willing to pay for benefits. They are most appropriate with huge populations.
Discount plans at a cost: These come with a monthly fee. In general, these networks probably already have millions of customers and won't receive better discounts by adding more clients. So they charge a fee to pass along their negotiated rates. If you’re paying for a plan, you should expect significantly better average discounts (look for 30 percent or higher) than you’ll see with a free program.

What else should I know about dental discount plans?

Braces and cosmetic treatments are prevalent in today's world and have really become society's standard. Because they’re not included on most insurance plans and the cost of these procedures are so high, providing a solid discount is an extreme value to the member and their family.

Dentist offices tend to be strict when giving the discounts—using a well-known brand-name network makes the experience better for your customers.

What else should I know about vision discount plans?

With vision insurance, members are mostly concerned with the eye exam, which isn't near the annual cost of glasses or contacts. Your main objective with a vision discount should be to have a fantastic eyewear network/discount—the provider network for exams is secondary.

Also, be sure your network includes LASIK. A typical carrier may provide a simple 15 percent discount, but a good discount plan can be at 40 percent or more.

Both PPACA and the bad economy appear to be with us for some time. We need to find new ways to serve clients so we can expand income streams beyond medical, dental and vision insurance. Implementing solid discount networks and other non-insurance benefits are a very sensible and profitable solution for you and your clients.

Instant Insights /

Who's dropping dental and vision insurance?

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