Fighting Insurance Abuse, SB622

I prefer a free market to regulations, but until we can free the market from previous regulation, sometimes new regulations are required to provide balance. Senate Bill 622 is such an example.  Because I am a dentist, I know, and am affected by, this particular abuse intimately, but the principle applies to health insurance across the board, so I will explain the problem from my own Point-of-View. But if the insurance companies get away with this in dental insurance, you can expect it to become a more widespread problem.

Most dental (and other health care) insurance is through Participating Provider Agreements. Under these arrangements, health care providers accept a discounted fee, partly paid by the insurer (or employer as most are self-insured) and by the patient, usually on an 80/20 basis. In return for accepting the discount, the provider enjoys a stream of patients who can afford his services because the majority of the fee is paid by the insurance.

But dental insurers have long sought to replace their PPO plans with “Discount Plans” under which the insurer pays nothing and only “sells” the insured their ability to coerce a discounted fee. As this benefits only the insurer, and the employer who pays the premium, and shifts a huge burden to the patient by eliminating the 80% insurance payment, it makes dental care LESS affordable, so dentists have mostly refused to participate.

So insurers have responded by demanding that dentists accept discounts on non-covered services in order to participate in their PPO plan. Initially, this may appear to benefit the patient as they get a discount on those non-covered, often cosmetic, services their plan does not cover, but this gives the insurer a way to ‘phase in’ discount plans by gradually reducing the services covered until they pay nothing. The goal of the insurers is not to save patients money on those services currently not covered, but to reduce and eventually eliminate their portion of payments on all services.

While insurance companies are exempt from anti-trust laws, dentists are forbidden to collectively bargain the terms of PPO agreements, allowing the insurers to present each individual dentist with take-it-or-leave-it contracts.  A single insurer, Delta-Dental, for example, controls about 40% of the local dental insurance market, and few dental practices could survive if they opted out of the Delta Dental PPO. Further, insurance companies, hiding behind their anti-trust exemptions, collude to all offer the same sort of plan.

If dentists were permitted to refuse to participate in a given plan AS A GROUP, we could negotiate with the insurance companies on an equal footing, but we would be prosecuted for restraint of trade by the Federal Trade Commission if we even discussed such an action. This gives insurers an overwhelming advantage in the marketplace.

This leaves us only with legislative action to protect ourselves and our patients. Senate Bill 622 would prohibit such compulsory acceptance of discounts on services not covered by the insurance plan.It should pass, but it faces strong and well financed opposition by the insurance industry and labor unions (which are in effect insurance companies as they self insure their members) and is being mis-characterized as a bill which would only benefit dentists. Such an editorial by Christine Nuckols appears in today’s Virginian Pilot.

In truth, without SB622, within a decade, dental insurance as we currently enjoy it will cease to exist and all of the benefits it has brought, especially access to preventive care and early intervention, will be lost.

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4 Responses to Fighting Insurance Abuse, SB622

  1. georginashenton says:

    While selecting an affordable medical insurance plan that has great coverage can be a difficult task, especially in the current state
    of the economy, our health is still our most valuable asset and it is very important to protect it as much as possible.
    We should make it even more essential to truly understand the importance of global medical insurance and who to go about finding it.

  2. Matt Cholko says:

    I’m not an expert in this area, but this bill doesn’t sound like a good one to me. It seems like this is just another bill that provides yet another group with an exemption from facing market forces. I understand the “little guy” argument, but I don’t think that further distorting the market by telling insurers what they can and cannot negotiate with dentists is the way to solve the problem. As a libertarian, I have a hard time accepting that government force is the right solution to anything. Like I said though, I’m far from an expert in this area.

    Regarding the final paragraph; your statement that “dental insurance as we know it will cease to exist” implies that the situation will be worse if the General Assembly does not act. Again though, we should remember that markets tend to improve things when left free from interference. So while you’re probably right that things will change, I don’t think it is right to figure they will automatically get worse.

    • Don Tabor says:

      Matt, I agree that this bill is not the first choice as a means to deal with this problem. But previous government intrusions into the market have created the problem, and the primary problem is the FEDERAL anti-trust laws, which the Virginia General Assembly cannot change.

      Insurance companies have exemptions from those laws, dentists do not. While I would not support the idea of dentists colluding to fix prices, I do believe the better solution to the problem would be for dentists(and other health professionals) to be allowed to collectively bargain, on a voluntary basis, the terms of insurance contracts. As it stands, the insurers can more or less present dentists with take-it-or-leave it contracts which we cannot afford not to take. But if we could group together to tell insurers ‘no’ on such onerous contract terms, we would have a real free market. But if we even meet to discuss refusing such a contract en-mass, the FTC will charge us with restraint of trade. Union members are allowed freedom of association, dentists, as independent business owners, are not.

      So, sure, give us voluntary collective bargaining and we don’t need this bill. But until the Feds do so, and give us equality in negotiating contracts, we need the State to regulate the insurers to prevent abuse of their anti-trust exemptions.

      If you have a suggestion for a better means for the Virginia General Assembly to restore freedom in the marketplace without the Federal government’s approval, I would be delighted to hear it.

  3. Matt Cholko says:

    I just don’t like the idea of turning to government to solve the problem. Looking to government to fix things is what created the huge mess of regulations that we have now. Its the never ending cycle – government regulation causes a problem, so government regulates more to “solve” the problem. The new regulation squeezes yet another party, so a new regulation is needed to “solve” this problem. I agree that dentists should be free to collectively bargain, or not, and that insurance companies should be free to make crazy demands, or not. The General Assembly can’t change the federal law, and I don’t have a better idea of how they would remedy this situation. Even so, I cannot support this bill.

    For the record, I feel for dentists (and all health professionals), as they are asked to operate within a ridiculous mess of laws and standards and with the constant threat of unreasonable litigation.

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