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

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

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

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But I’m not saying you should drop insurance products fordiscount products. Rather, I’m saying, many of your clients aredropping dental and vision insurance. When that happens, what'syour transition product?

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Most of you probably have one of two answers…

  1. I got nothin’

  2. I’d sell voluntary

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

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

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

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

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

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

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Why discount plans?

  • Networks are a fraction of the cost of insured plans, so theycan be installed at the employer level for all employees. It helpsalleviate 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 mayactually make as much as you did on the fully-insured products.

  • If you answered “I got nothin’” above, a non-voluntary groupdiscount plan is easier for you to learn and install than sellingvoluntary.

  • If you answered “I’d sell voluntary” above, you haveoptions:

  • Some groups are best served with a non-voluntary discountplan.

  • Some groups need a non-voluntary discount plan, but you’ll stillsell voluntary insured dental/vision plans to the people who seevalue with these.

  • Some groups need a non-voluntary discount plan, then you’llfocus your voluntary sales on other products (disability, criticalillness, etc.)

How they work

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

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

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

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

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Can these be used with HSA/HRA/FSAs?

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

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Do these coordinate with insurance?

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

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Can this be paid for with Section 125 pre-taxdollars?

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

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Can these plans be sold as voluntary?

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

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

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Always judge a good discount plan based on these twoquestions:

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How wide is the network?

  • A network doesn't need to include all the providers in thecountry, but it does need to have solid offerings within areasonable distance of most clients. Know what your members need(regional, multi-state or national). Understand smaller communitiesdon't lend themselves to significant network savings, because theproviders don't need help getting clients. Also consider the typesof 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 ofdiscounts is a function of how much additional business is beingdriven to a given provider. The discount will often be stated as atop-level (i.e. “up to 60 percent savings”) or as a range (i.e.“20-60 percent savings”). The range is most popular as differentspecialists and different products usually carry different levelsof discounts within a network. However, you should focus on theaverage discount. If a discount plan claims “5-50 percent savings”but the average is 15 percent, that's much less valuable than anaverage of 35 percent. Many networks may not want to give you thisnumber, but it's necessary to consider when making a decision. Thebetter discount plans are able to negotiate average discounts of 30percent or better.

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What Types of Plans are There?

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

  • No-cost discount plans: Some networks will giveaway their network pricing if they see value in adding huge volumesof people to their customer base. The increase allows the plan tonegotiate better pricing for the whole. These cards are very viablein associations, affinity groups or other organizations that arenot able/willing to pay for benefits. They are most appropriatewith huge populations.

  • Discount plans at a cost: These come with amonthly fee. In general, these networks probably already havemillions of customers and won't receive better discounts by addingmore clients. So they charge a fee to pass along their negotiatedrates. If you’re paying for a plan, you should expect significantlybetter average discounts (look for 30 percent or higher) thanyou’ll see with a free program.

What else should I know about dental discountplans?

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Braces and cosmetic treatments are prevalent in today's worldand have really become society's standard. Because they’re notincluded on most insurance plans and the cost of these proceduresare so high, providing a solid discount is an extreme value to themember and their family.

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

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What else should I know about vision discountplans?

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With vision insurance, members are mostly concerned with the eyeexam, which isn't near the annual cost of glasses or contacts. Yourmain objective with a vision discount should be to have a fantasticeyewear network/discount—the provider network for exams issecondary.

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

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

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