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New survey shows changing dental insurance landscape. Here’s what you need to know

Sept. 17, 2020
Health and dental insurance are fast converging, and this leads to significant consequences for the dental industry. How will this affect your practice?

By Benjamin Baenen and Will Hinde

The number of health plans offering adult dental benefits has more than doubled since 2018, according to a new survey by the firm West Monroe Partners, as health and dental insurers hurtle toward convergence.

While in some ways this represents a drastic shift, in others it is in keeping with broad changes in health care: away from costly fee-for-service models and toward coordinated care, value-based reimbursement, and more streamlined, affordable, and prevention-based experiences.

Still, the effect of this accelerating convergence will be felt throughout the dental industry. Standalone insurers that have historically dominated the market will be forced to evolve, partner with health plans, or lose out to new competition. Dental practices will have to adapt to new insurance plans and a growing consumer demand for value-based care and shifting reimbursement models. Ultimately, ideally, consumers will reap new benefits from their dental payers and providers.

Here we’ll unpack some of these impacts, drawing on the key findings collected in West Monroe’s latest survey of health and dental insurers.  

Convergence is here, and accelerating

As more health plans offer dental benefits, the territory that standalone dental payers long had to themselves may dwindle: a third of survey respondents posited that these payers’ market share will fall to 90% by 2025 (from around 97% today); one in five believe it will drop below 85%.

That may not seem like a significant drop, but for both dental and health plans it represents a seismic, and rather sudden, shift. In our 2018 survey, for instance, leaders at health plans that did not currently offer dental benefits had no real plans to do so; this year, a quarter of health-plan executives say they are likely to offer them in the future. What’s more, ancillary (non-medical) insurers are also entering the mix, with half the executives surveyed suggesting that these players are exerting significant pressure on the oral benefits market.

In response, dental payers have begun laying the operational and strategic groundwork necessary to stay competitive, with most expecting to partner (54%) or bundle benefits (46%) with a health insurer by 2025.

This, of course, is easier said than done. Standalone dental plans’ survival depends on an ability to be truly proactive and strategic in their efforts. This can be innovating in areas like alternative payment models, teledentistry, or data sharing; updating technology capabilities, which 67% identified as their biggest areas of investment; optimizing processes via data management strategies and improved operating metrics; or exploring their options for diversification, whether that means becoming pure third-party administrators, merging with or acquiring other companies, or offering ancillary products (e.g., vision, hearing, life, pet) of their own.

What dental insurance will look like in coming years

Though convergence is accelerating, bundled health/dental plans remain in their relative infancy. Insurers have yet to see the blueprint for integrating the two products and coordinating subsequent care between physicians and dentists. Meanwhile, the technological capabilities needed to smoothly administer and underwrite a unified product remain in process, despite strides made by health insurers. (The number of respondents citing a lack of appropriate technology as a barrier to convergence has dropped 10% since 2018, to 36%.) If the industry’s slow adoption of pay-for-performance reimbursement models is any indication, any change will likely occur gradually.  Still, West Monroe is recommending preparation.

Today’s consumers, however, increasingly demand and expect convenience. Perhaps this explains why the 2018 respondents saw health and dental insurers entering into a two-product, two-premium model, while this year that scenario took a backseat to a one-product, two-premium model: in effect, while the administration may take place separately behind the scenes, the product (health and dental benefits) will still appear singular to the consumer.

This single-product model carries some key advantages: it appears bundled and cheaper (combining products enables plans to offer discounts) to the consumer, while the underlying operations require limited administrative changes. Because a single system capable of tying products and procedure codes together remains out of reach for now, this model provides today’s insurers with the quickest path to market.

Consumer demand will grow

Only 37% of US adults visited the dentist last year, a number that, in light of COVID-19, likely won’t go up in the immediate future. Pandemic aside, the statistic reflects some skepticism, expressed by a number of health insurance executives in our survey, that millennials may see less value in dentistry as a result of better oral health products, fluoridation, and a variety of additional factors that have lowered susceptibility to dental disease.

Yet this year’s survey also shows that many see the same glass as half full. When asked about the factors driving the shift away from standalone dental plans, a majority of respondents noted the integration of oral health with overall health. This integration—combined with value-based dentistry, partnerships with health plans, and the fact that dental insurance coverage is the strongest determinant of whether an individual will make regular dental visits—should ultimately lead to a higher volume of overall visits.

What’s more, nearly half of this year’s survey respondents (48%) say they expect the market for employer-sponsored dental plan membership will grow in the next five years, and only 14% believe it will shrink. This is especially true of the individual market, where 63% anticipate growth. As COVID-19 and high unemployment drive a shift away from employee-sponsored plans to individual ones, this market could see an even bigger rise than our survey (conducted before COVID-19 hit) initially suggested.  

As consumer demand grows and convergence accelerates, the promise for consumers, dentists, and insurers is that the sharing of health and dental data will offer more holistic and meaningful insights, insights that will ultimately deliver better health outcomes and a more seamless, engaging, and convenient patient experience.

In other words, while the imminent shift does pose some risk to dental plans content to rest on their laurels, it also presents a real opportunity for providers and payers alike to provide more coordinated, value-based care to more patients at a lower cost.

Convergence is the future, and it’s coming fast. Now is the time to assess whether you’re ready for it.

Benjamin Baenen is a director in West Monroe’s Healthcare and Life Sciences practice, where he directs transformational initiatives spanning product innovation, new market entry, operational transformation, and technology disruption.

Will Hinde is the managing director of West Monroe’s Health and Life Sciences Practice, where he builds multidisciplinary teams to identify innovative ways to boost profitability, create and capture value, and secure a competitive advantage for clients in the health plans, health systems, life sciences companies, and specialized health spaces.