Benefit Design Strategies to Better Position Your Company for the Future

March 17, 2005

Steven H. Keller, DDSVice President, Business Development

Institute for International Research, Philadelphia

Washington, D.C.69 Square Miles

Surrounded by Reality

POLITICS

“The gentle art of getting votes from the poor and campaign funds

from the rich, by promising to protect each from the other.”

-Oscar Ameringer

“If you are not confused by what is happening in the healthcare industry today, then you are

not thinking clearly.”

-Marc B. Cooper, D.D.S, M.S.D., C.P.C

A Clear Trends Towards PPOsDental PPOs are the fastest growing segment

in the dental benefits market.

Source: NADP

64.9 69.7

91.9101

111.4

54.1 5140.2 35.3 30.5

23.4 23.6 19.4 17.9 15.5 11.3

82.2

45.4

0

20

40

60

80

100

120

2002 2003 2004e 2005e 2006e 2007e

PPOIndemnityDHMO

Shortage of Dentists

Dental Fees Are Increasing

The main barrier to seeking dental care is

its high cost.

Private Dental Coverage Impact on Dental Visits and Expenditures

$298.70$417.20Mean total expenditure

28.6%56.6%% with at least one visit

Without Private Dental Coverage

With Private Dental Coverage

Source: Manski, Macek, Moeller JADA 11/02

Quality of Care

Our ethics determine how

we treat patients, not if we

participate in managed

care or not.

Healthcare costs are escalating

3 years of double digit medical increases

Employers are passing more dental costs to employees

Dental sales have been flat

In force subscribers increased only 1% in 2003

90% of employer groups with > 100 employees already have dental

“A Look at the U.S. Group Dental Market: Trends and Opportunities” a LIMRA-AHIP Study

What makes sense in the marketplace?

“The ability to change more rapidly than the next organism

is the only sustainable competitive advantage.”

-Charles Darwin

Majority of employers (87%) offer only 1 dental plan

to their employees.

The Changing Group Insurance and Health Care Marketplace, LIMRA International, 2003

It’s all about choice

Flexibility is key

Providing more benefit options will yield greater profits

How much can employers

save by offering multiple options?

“If a man is standing in the middle of the forest speaking and there is no woman around to hear him….. is he still wrong?”

“Is it true that cannibals don’t eat clowns because they taste funny?”

“Do pediatricians play miniature golf on Wednesdays?”

-George Carlin

Triple Option Dental

Indemnity / PPO with wide access and/or high option

PPO with focused access and/or low option

DHMO

Company A2155 employees in the Baltimore/Washington areaHad PPO plan as only option in 2002Offered dual option plan 1/1/2003490 employees switched to DHMO in 20031094 employees were enrolled in DHMO in 2004

PPO DHMOSingle $27.00 $14.00Single +1 $53.00 $26.50Family $85.00 $34.00

Company A SavingsAnnual Annual Premium Savings

2002 PPO only $ 1,324,476 $ 02003 Dual Option $ 1,158,240 $ 166,2362004 Dual Option $ 973,356 $ 351,120

“Denial is not a river in Egypt.”

-Flip Wilson

Voluntary Dental Plans

Growing nationallyResponse to rising medical costsMore virgin groupsMinimal participation levelsWorksite marketing

Discount Access Plans

Individual Dental Plans

Exclusive Provider Organizations (EPO’s)

Leased Dental Networks

Self Funded Plans18% overall 46% with 500-999 employees56% with 1,000-4,999 employees69% with >5,000 employees

The Changing Group Insurance and Healthcare Marketplace, LIMRA International, 2003

Health Savings Accounts

“Change is neither good nor bad,

it just is.”

- John F. Kennedy

Properly anticipating or responding to change will

present unique and unprecedented opportunities.

Consumers Want What They Want

Customer ServiceInformationConvenienceChoiceControl

Consumer Friendly IdeasFull benefits schedule onlineDirectory of dentists online Email accessReal person answering the phoneLimit or eliminate pre-authorizations for specialty careAnswer common questions on the web Download forms

“You should not confuse your career with your life.”

“No matter what happens, somebody will find a way to take it too seriously.”

“There is a fine line between ‘hobby’ and ‘mental illness’.”

“Never, under any circumstances, take a sleeping pill and laxative on the same night.”

“Your friends love you anyway.”

“Things It Took Me 50 Years to Learn” –Dave Barry

Dentist Friendly IdeasCheck eligibility online in real timeElectronically submit claimsCheck fees by ADA codeLimit or eliminate pre-authorization for specialty careAnnually review of MAC fees on PPO’sAnnually review capitation and copays on DHMO’s

“I think there is world market for maybe five computers.”

–Thomas Watson, Chairman of IBM, 1943

“640K ought to be enough for anybody.”

-Bill Gates, 1981

Definition of “Wellness”“Wellness”

A health care process that fosters awareness, influences attitudes, and identifies alternatives to unhealthy lifestyles so that individuals can make informed choices and change their behavior to achieve optimum physical and mental health.

Medical Costs of Chronic DiseasesTreating Dental Disease Costs Over $65 Billion Annually

National Center for Chronic Disease Prevention

0

50

100

150

200

250

CV & Stroke Dental Cancer Diabetes Arthritis

Interventions “DQV’s Wellness Approach”TODAY’S DENTAL

BENEFITS1950’s ScienceSurgical Repair– Anesthesia– Fillings– Root Canals– Gum Surgery– Crowns– Dentures– Extractions

TOMORROW’S DENTAL BENEFITS

21st Century ScienceMedical Healing & Wellness– Remineralization to heal

tooth decay– Medicine to heal gum

disease– Treating perio in expectant

mothers reduces pre-term deliveries

– Treating perio in diabetics lowers disease

Tomorrow’s Science Today’s Benefit Plan

“Making predictions is dangerous, especially

when they’re about the future.”

- Yogi Berra