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Group Ins. -Sales, Marketing, and Distribution & Group Dental Ins.

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What is Marketing?
ï‚Ÿ finding out the cpy's current position in the market
ï‚Ÿ thinking of future opportunities
ï‚Ÿ understanding customers and competitors (= market research)
ï‚Ÿ statistical analysis
ï‚Ÿ Product Development (2 methods: see below)
ï‚Ÿ Advertising
ï‚Ÿ Ongoing customer service
Key Areas in Marketing (from Kong 41)
ï‚Ÿ Market Research
ï‚Ÿ Field Marketing
ï‚Ÿ Communication
ï‚Ÿ Advertising
Key Steps in Sales (from Kong 41)
ï‚Ÿ identify opportunities
ï‚Ÿ make contact
 identify the target audience’s needs
ï‚Ÿ underwrite the risk
ï‚Ÿ sell the solution.
Keys to Successful Advertising and Promotion (from Kong 41)
ï‚Ÿ Ads can be on TV / Radio / Print. (TV reaches biggest audience, but is most expensive)
ï‚Ÿ The advertising media depends on the:
 desired goal (to create brand awareness? to give members specific benefit info?)
 target audience (location / demographics)
 cost of advertising
Challenges to MCO’s in Sales, Marketing, and Distribution (from Kong 41)
ï‚Ÿ meeting Choice-based Competition
ï‚Ÿ Achieving strategic sales goals
ï‚Ÿ Effective use of the Internet (e-commerce)
ï‚Ÿ successful advertising and promotion
ï‚Ÿ Meeting User expectations / demands
Customers = Users = Decision Makers = Stakeholders. These include employers, employees, policyholders, agents, medical providers, MCO’s staff, MCO’s managers, MCO’s board of directors, rating agencies, etc. List them every time a question involving them comes up.
ï‚Ÿ maintaining Quality
 of the plan
 of the providers
 by credentialing them
 by using Provider Profiling (see Kong 32)
ï‚Ÿ regulatory restrictions
 consolidation of MCO’s into larger entities (a current trend)
ï‚Ÿ increasing medical costs
 keeping Agents / brokers happy (see “Distribution Models”, below)
Product-Driven Approach – (used by traditional group insurers)
1. Generate ideas (done by product committee, mgrs, customers, ee's, etc.)
2. Screen the ideas – is product compatible with insurer strategy, resources and skills?
3. Concept development - determine the plan benefits; who are the buyers going to be?
4. Business analysis – project costs; do ROI or ROE analysis
5. Product development – final product with all details
6. Test-marketing
7. Commercialization – full scale manufacture and distribution
8. Advertising
Market-Driven Approach – (used by MCO's)
1. Choose target market
2. Assess needs of target market (market research)
3. Identify the differential advantage (means “how should we make our product different from the competitors' ?”)
4. Strategy formulation to build and deliver product, based on the differential advantage
5. Test marketing
6. Full implementation
7. Advertising
Note: Product-Driven begins with a product. Market-Driven begins with a target market.
Mnemonic: Plain ins cpys use Product-driven
MCO’s use Market-driven
Managed Care’s Impact on Marketing Methods
 MCO’s were able to charge less for their product than Traditional Insurance companies could.
Aside from the marketing strategy differences, MCO’s succeeded b/c they were able to develop ways to monitor provider practices, control utilization, and limit access to expensive technologies. This enabled them to charge less for their products. Meanwhile, traditional group Health insurers had no way to control costs except by raising their coinsurances and deductibles and encouraging er's to pass on their costs to their ee's.
Now, MCO’s have to work to keep themselves competitive, due to consumer backlash against their cost-controlling and care-denying techniques.
 MCO’s also focused on purchasing decisions by both ER’s and EE’s.
 MCO’s have caused a change from the Product-Driven approach to the Market-Driven approach (see above)
Group insurance has two levels of sale:
1. Sale of an insurance plan, from the Ins Cpy to the Plan Sponsor
2. “Sale” by the plan sponsor to the employees.
The intermediaries (brokers, agents, and consultants):
ï‚Ÿ help the er purchase a plan
ï‚Ÿ help the er communicate / market it to the ees
ï‚Ÿ give advice on plan design and pricing
ï‚Ÿ help the employer in claim disputes
ï‚Ÿ suggest plan design alternatives upon renewal.
Independent Brokers
 Brokers sell competitors’ products, too.
ï‚Ÿ self-employed and have their own office space

Advantages to Your Insurance Company:
ï‚Ÿ they require less capital and staff (since the agents are self-sufficient)

Disadv:
 they’re not committed to your company
ï‚Ÿ high commissions
 your product must be competitive or they’ll sell other cpys’ products instead.

Used by:
ï‚Ÿ small ins cpys, selling to small er groups or individuals
Captive Agents
Same, but only represent one company’s products.
Group Field Force
 Group Representatives sell “wholesale” to the recipient employer group.
meaning one company sells to another, with no intermediate agent.
ï‚Ÿ they are captive (work for your company only)
ï‚Ÿ full-time; paid a fee for services rendered
ï‚Ÿ they work with the EE benefit consultants in the employer group.

Adv:
ï‚Ÿ loyal to your insurance company
ï‚Ÿ a wider distribution channel than agents; they can cover more area

Disadv:
ï‚Ÿ overhead expense (since they work in your company, you must pay for salary, building space, employee benefits for them.)

Used by:
ï‚Ÿ large ins cpys selling to large er groups.
Direct Sales
ï‚Ÿ mass mailing, telemarketing, website marketing.
ï‚Ÿ good for cpys with good brand name recognition
Multiple Level Distribution Model
ï‚Ÿ Uses a wide variety of distribution channels, including brokers, retailers, wholesalers, agents, and telemarketers.

Adv:
ï‚Ÿ The multi-level distribution system can exploit whichever channel works best in a particular area

Disadv:
ï‚Ÿ it requires sophisticated sales mgmt and marketing support
ï‚Ÿ it is expensive to maintain

Used by:
 national-class MCO’s and ins cpys.
Sales to Individual Participants
ï‚Ÿ Needed when an employer offers multiple health plans from different companies
ï‚Ÿ Ins Cpy enrollment specialists conduct worksite meetings.
Additional Distribution Methods
ï‚Ÿ TV, newspaper, worksite marketing
ï‚Ÿ Internet marketing (e-commerce)
 advertising, image building, giving out info about the company, sales quotes
Market Segmentation means
dividing the target markets into different categories:
ï‚Ÿ by size
ï‚Ÿ by industry
Advantages of Market Segmentation:
 helps the ins cpy understand its potential customers
 helps the ins cpy choose a product to develop
 helps the ins cpy choose a distribution method.
ï‚Ÿ Small group marketing is heavily regulated:
 pricing
 underwriting
 guaranteed issue
 statutory plan designs
ï‚Ÿ In order to stay profitable in this environment, an Ins Cpy must keep distribution expenses to a minimum.
 Typical distribution method: Brokers/Agents; mass-marketing
Marketing to Large Group ph’s
ï‚Ÿ Not as heavily regulated.
ï‚Ÿ Flexibility in plan design is needed.
 The ins cpy’s group sales reps work with the group’s ee benefit representatives.
 more sales / product expertise is needed
Marketing to the Decision Makers (from Kong 41)
List all of them.
to Brokers/Agents/Consultants
“Marketing” to agents means developing a competitive product that they feel good about selling.
 build strong relationships with them
 give them incentives (i.e. commissions) to bring in good business for the MCO

to Ers
Ers want:
 financial stability of the insurance plan
 compatibility of the insurance plan with HR objectives
 a choice of plans (for employee satisfaction)

to Ees
 consumers are self-reliant and educated these days
 Ees want:
 a choice of plans,
 low cost,
 easy access to providers
 prompt claims adjudication

to Providers (doctors)
 an MCO needs good provider contracts and good network management


Done
People covered by Dental Insurance
 Private commercial market (75%) – the focus of this chapter
ï‚Ÿ Medicaid recipients
Note: Medicare doesn’t cover dental
ï‚Ÿ military personnel
ï‚Ÿ government workers
Differences Between Dental and Medical plans
ï‚Ÿ Dental plans focus on preventive care.
ï‚Ÿ Dental claim costs are lower. Deductibles much lower.
ï‚Ÿ Dental service is fairly elective, so dental plans are offered only to groups, not to individuals.
 Plans are designed to reduce antiselection. (See “Antiselection Controls” below)
ï‚Ÿ Lifetime maximum of $1,000 or $2,000, compared to medical plans, which usually have unlimited lifetime maximums.
ï‚Ÿ No conversion to an individual policy after terminating employment (although there is still COBRA)
ï‚Ÿ Experience Rating is used more often than in medical insurance (because claim costs lower, in a narrower range, and more credible)
Dental benefit classes
ï‚Ÿ Type I (Preventive and Diagnostic)
 preventive (cleanings)
 diagnostic (x-rays, examinations)
ï‚Ÿ Type II (Basic)
 Fillings, extractions, root canal
ï‚Ÿ Type III (Major)
 Crowns, Bridges, Dentures
and usually:
ï‚Ÿ Orthodontics
 Orthodontics is given its own deductible and lifetime maximum coverage.
 Only 25% of the total cost is usually covered, due to the elective nature (read: Antiselection) of orthodontic coverage.

A 100/80/50 plan reimburses 100% of Type I, 80% of Type II, and 50% of Type III.
UNDERWRITING FEATURES FOR GROUP DENTAL INSURANCE
A S H F I L E O A F F E Z P O T

A (age), S (sex) and F (family)
 Dental Plans only cover active ee’s and their dependents or spouses. No retirees.
ï‚Ÿ Old people and females utilize more, so are charged higher
I (industry)
ï‚Ÿ Actors, Teachers, Professionals, and Sports Teams have the highest Dental utilization, and are charged higher rates.

L (location)
ï‚Ÿ costs in cities are higher
O (offsetting, coordination with enrollee’s other dental coverages)
A (antisel ctrls)
ï‚Ÿ Min. Ee participation level; Min. Er contribution
see below for more
Z (group Size)
ï‚Ÿ groups should have at least 5 people, to lessen the effects of antiselection.
ï‚Ÿ The larger the group, the lower the claim costs per member.

P (prior coverage)
ï‚Ÿ groups with no prior coverage, who are just now buying dental insurance, will have high costs due to antiselection.
 A “pre-announcement period” — telling the ees that dental coverage is coming in 3 months — also increases antiselection and costs.

O (overstaffedness, turnover)
ï‚Ÿ turnover exposes the insurer to constant new antiselection.

T (type of group)
ï‚Ÿ Employer Groups, Unions, etc.
ï‚Ÿ Must not be a group formed for the purpose of getting insurance.
Types of Indemnity Plans
Two types: Scheduled and Non-Scheduled.
Scheduled Indemity Plan
 There’s a list of covered services (ADA #’s)
ï‚Ÿ Each ADA # has its own maximum reimbursement level for the patient
ï‚Ÿ Dentists are paid on an FFS basis
ï‚Ÿ Dentist can balance-bill the patient.
Recall: Balance billing means that even though the Insurance Company reimburses the dentist only $50 for a procedure, the dentist can bill the patient for an additional $45, if the dentist normally charges $95 for it.

Disadvantage of Scheduled Plans:
 The schedule of maximum benefits must be updated each year.
Non-scheduled Indemnity Plan
ï‚Ÿ Most common.
 Reimburses the patient based on the UCR cost of any procedure (still subject to the plan’s deductibles and coinsurance)
(UCR = usual, customary, and reasonable)
Managed Indemnity Plan
 Ins Cpy negotiates lower Ffs’s with network dentists.
ï‚Ÿ patients are encouraged to use the network dentists, by reduced out-of-pocket charges.

Advantage:
 introduces the Managed Care concept to employees without causing a huge plan change.
PPO Plan
A PPO is an arrangement between an Ins Cpy and a panel of providers (“Preferred Providers”) whereby the providers agree to accept payments less than their usual fees in anticipation of a higher volume of patients.
ï‚Ÿ The Ins Cpy gives incentives to patients for using the in-network providers.
 for example, 100/80/50 in-network, but only 80/70/40 out of network.
 or, no balance-billing in network.

Discounted Fee for Service PPO
ï‚Ÿ The dentists agree to receive only a percentage of their normal fees, in return for the MCO bringing them a higher volume of patients.

Fee Schedule PPO
ï‚Ÿ The dentists agree to be compensated on a fixed fee schedule (the payment depends on the type of dental procedure)
ï‚Ÿ Fewer dentists will agree to this form of reimbursement

Discount Referral Plan
ï‚Ÿ Not an insurance plan at all.
ï‚Ÿ The employee is issued a coupon (discount card) that lets him get dental work from participating dentists at a discount.
ï‚Ÿ The patient pays the dentist directly. There are no claim forms.

Exclusive Provider Plan (EPO)
ï‚Ÿ This is an in-network only dental plan. Patients are not covered if they go out of network.
ï‚Ÿ As a result, better discounts can be negotiated with the dentists.
PPO Plans provide many of the same functions as regular HMO's:
ï‚Ÿ Claims processing and adjudication
ï‚Ÿ Financial reporting
ï‚Ÿ Risk-sharing between Ins Cpy and Providers, occasionally
ï‚Ÿ UR (Utilization Review; that is, required authorizations for certain treatments)
ï‚Ÿ CM (Case Management)
ï‚Ÿ QM (Quality Management)
see Kong 18, Kong 22, and Kong 30 for more on UR, CM, and QM.
But these programs are not as extensive as in HMOs.
POS Plan
ï‚Ÿ A hybrid between Indemnity and HMO plans.
ï‚Ÿ Patient can pick an HMO provider or an out-of-network provider, each time he needs dental care. He is not limited to one choice of provider a year during some open enrollment period.
ï‚Ÿ the Benefit level depends on which type of provider the patient chooses.
Administratively, the subscriber is enrolled in the HMO, but can go out of network anytime he wants (at drastically reduced benefit levels)

By contrast, “Dual Option” refers to an employer plan in which an employee can choose between traditional Indemnity coverage or HMO coverage. The employee can only make this election once a year, during the open enrollment period. If he chooses the HMO, then he must use only the HMO’s in-network providers for the whole year.
Dental HMO (DHMO) Plan
For Dental HMO’s
ï‚Ÿ No deductible; No lifetime maximums
ï‚Ÿ but there are Copays.
ï‚Ÿ Certain type III procedures may have coinsurance.
ï‚Ÿ There are still some exclusions (missing tooth; cosmetics).

IPA Model DHMO
Independent Practice Association model HMO
 This means the HMO’s network of dentists consists of IPA’s: dental organizations that receive monthly capitation payments.
These dental organizations pay their member dentists of their own accord, usually by subcapitating them.
 (Specialty Dentists are still compensated on a discounted Ffs basis).


Staff model DHMO
 The dentists are employees of the HMO, and receive a monthly salary.
 This model gives the HMO the most control over cost of care.
Comparison of General Plan Characteristics
Comparison of General Plan Characteristics
PPO’s are between HMO’s and Indemnity, for all categories.
ï‚Ÿ Price paid by patients
 Traditional Indemnity (highest)
 PPO (20% less)
 HMO (40% less)
ï‚Ÿ Benefit Richness (HMO = best)
ï‚Ÿ Preventive care coverage (HMO = most)
 Patient Access to dentists (Indemnity = best; HMO’s most restrictive and require proper authorization and referrals.)
ï‚Ÿ Reimbursement of physicians: Indemnity=UCR; PPO=Ffs; HMO=Capitation
ï‚Ÿ Cost Control; UM: (HMO = most)
ï‚Ÿ Quality Assurance (QM): (Indemnity=low; PPO=medium; HMO=best)
ï‚Ÿ Fraud Potential: Indemnity=worst; PPO=medium; HMO=best
Indemnity plans don’t restrict the patient’s choice of doctors. The insurance company doesn’t know what the doctor’s normal charges are, and the claim submitted can easily be falsified.
Advantages to Patient of
Indemnity:
ï‚Ÿ best patient access (patient can choose just about any dentist)
ï‚Ÿ No utilization limits
But, highest cost (to patient) for each procedure.
HMO:
ï‚Ÿ Cheapest cost to patient
ï‚Ÿ Richest benefit level
ï‚Ÿ Best Quality Assurance
HMO’s limit patients’ choice of dentists, so their dentists have to be of high quality. Whereas Indemnity plan dentists are unregulated and unmonitored.
But, most restrictive network of dentists to choose from.
PPO
ï‚Ÿ medium, for all categories.
Screened credentials include:
ï‚Ÿ Biographical info
ï‚Ÿ Practice info
ï‚Ÿ malpractice history
ï‚Ÿ on-site office reviews
ï‚Ÿ sample patient records
ANTISELECTION CONTROLS FOR DENTAL INSURANCE
Dental Insurance is vulnerable to antiselection, since many dental procedures are elective or can be put off until insurance is obtained. The following are the antiselection controls which are key to Dental coverages:
ï‚Ÿ Always include some out-of-pocket cost to patient (to encourage prudent use)
ï‚Ÿ for Orthodontics, only cover 25-50% of the cost to the patient
ï‚Ÿ Set low lifetime maximum dollar benefits.
Group Dental maximums are low ($1,000), compared with the almost unlimited maximums for regular Group Medical Insurance benefits
ï‚Ÿ Underwrite patients by age, family size, industry, group size, group type
as in Underwriting Features, above.
ï‚Ÿ require a Minimum ER Contribution
 (that is, not too much ee contribution, or only the ee’s who really need dental work will participate and the healthy ee’s will opt out)
ï‚Ÿ require Minimum EE participation % (to obtain a safe cross-section of risks)
ï‚Ÿ Package Dental with other coverages
In other words, don’t let employees choose Medical coverage without buying Dental coverage as well.
 use a Waiting period (employee can’t join dental plan until x months after date of hire)
 Or could use tiered coinsurance: (plan covers 70/50/50 in first year, 90/70/50 second year, etc.)

ï‚Ÿ use New and Late Entrant deferral periods
An employee entering the dental plan late might have a reason for doing so (in other words, now he needs dental work). Don’t begin his benefits until after a deferral period.
ï‚Ÿ use Exclusions (missing tooth exclusion, cosmetics, experimental treatments)

Some of the Cost Controls listed below also prevent Antiselection. List as many of them as you can.
COST CONTROLS USED IN DENTAL INSURANCE
These are the ways that Dental Ins Cpys can keep claim costs from getting too high.
ï‚Ÿ All of the Antiselection Controls (above)
ï‚Ÿ Incentive Coinsurance
 Incentive Coinsurance means that the policyholder gets increasing benefits each year, as long as he keeps getting preventive dental treatments. For example, 100/70/35 in first year, plus 0/10/5 per year that he gets preventive treatments.
ï‚Ÿ UCR


ï‚Ÿ LEAT
 means the plan will cover only the Least Expensive Alternate Treatment to the treatment the patient wanted (if still medically acceptable)

ï‚Ÿ Frequency and Age restrictions (e.g. no more than 4 visits per year)
ï‚Ÿ precertification and authorization requirements
ï‚Ÿ Require proof of medical necessity (e.g. via X-rays)
ï‚Ÿ Dental Review Logic & Claim Payment Computer System (Claims Logic)
 automatically checks eligibility of patient
 automatic rebundling (to undo dentists’ “cheating” on their bills)
ï‚Ÿ Peer Review:
Have other dental professionals review any expensive claims (to make sure the treatment was necessary and should be reimbursed)

Done.
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