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Dental Insurance and In-House Plans | WOM 024 · The Word of Mouth Podcast

• Jeff: Welcome to the Word of Mouth Podcast, your weekly podcast helping private practice dentists increase profitability and maintain a successful business in their practice. I'm your host, Jeff, and I'm go joined today by my co host Troy. Troy: Good to be with you again, Jeff. Jeff: So last week we promised listeners that we were going to talk about in-house membership plans. And as dentists are feeling the pains of watching profitability slip away, with marketing changing, with operations changing within their practice, in-house plans become a very interesting option in order to increase profitability, increase patient retention, and increase the option to attract new patients. Troy: For sure. It's it it works well for practices as long as they're structured the right way. And it works well for patients who either don't have insurance or have started recognizing that for what they get out of insurance, it's not terribly cost effective. So they've emerged these membership plans and they have a lot to offer. So they're it they're exciting really for practices and and patients alike. Jeff: Yeah, it's great for from a clinical perspective. And a lot of that stems from the way dental insurance works. And one thing that we've discovered as we've spoken with a lot of dentists is that even dentists aren't one hundred percent understanding the difference between dental insurance, medical insurance. They know it kind of philosophically, but the the particulars of why things work the way they work for dental insurance. isn't always a hundred percent clear from a business perspective and why why it has such a great effect on business. Troy: For sure. I mean w while some certainly are steeped in the nuts and bolts of the insurance markets, even those who aren't feel the pain of what's going on with dental insurance, you know, and and insurance generally. and so it's it's something that we hear very frequently, which is the administrative costs, the the the flat or or marginally increasing reimbursements. There's so many challenges that insurance is presenting for dentists that more and more are are either looking to try to go fully fee for service or at least reduce their dependency on insurance plans. Jeff: Yeah, and so you mentioned some of the reasons behind that. The waiting periods are something that patients and dentists alike kind of face as a roadblock to treatment acceptance. That patient comes in, they think they've got great dental insurance, but they find out they've got a six month or a year waiting period before they can get any meaningful coverage. And so they defer treatment that you as a dentist know they need right now, they as a patient know they need right now, but because of the way the insurance is structured, they can't get access to that care. So on the as one part of insurance that's super expensive. The second part of insurance that affects dentists and patients alike is the maximum coverage per year. And that's something that's stayed the same or marginally improved, like you mentioned, for the last fifty years. Since the nineteen seventies, the average maximum coverage for dental insurance hasn't risen more than a few percent on average across plans. And yet inflation's gone three up three percent year over year for that entire period. And so dentists and patients Troy: Well and and Jeff: are starting to feel that pain. Troy: and d it it inflation has gone up three percent. The costs of dental services because of labor and because of material costs and whatnot have gone up much higher than that, much more rapidly than that. So the gap between those maximum cap coverage limits in a year and the cost of a lot of the, you know, particularly if we're talking about some restorative work, that gap has just continued to increase. and then maybe the third leg of that stool is that at the same time, premium costs have continued to go up. So patients are paying more for their insurance premiums to get less coverage relative to the actual cost of many of these services. So your your point's spot on, Jeff, that it's it's become less and less of a great deal. for people. How however, I I'll I'll just note the fact that there is a reality to it, that it's offered by many employers and especially those that have had it in the past and you know had it covered largely or even entirely by their employer. we kind of get used to that. And so if they go to an employer that that doesn't offer it, so often they s they still have this kind of knee-jerkery reaction to to go and find Dental coverage, even if mathematically it you know, it doesn't end up being a very good badge. Jeff: Yeah, that's where we found ourselves is we're self employed and we've paid for dental insurance because that's what happened when I was working in my last job where I was given dental insurance by my employer or that was provided as a benefit. And as we talked with our dentist about his in practice plan, the math just didn't make any sense. And it was something where I'd been going to this dentist for several years and I'd heard that they had an in practice plan, but I'd always thought, well, I just have insurance and that's usually a better deal. Like the just generally, that's sort of the accepted reality, I think, for the majority of people. But when I looked at the math, I was paying four hundred and eighty dollars a year for two cleanings for my wife. We have great oral health. And that was basically what was being covered by my dental insurance. And then if I had to pay for fillings or any sort of Dental treatment, it would be sort of covered by the dental insurance, but we were paying for kind of the cheapest we could find. And so it was like 20 or 30 percent was covered by the dental insurance, and then the rest was out of pocket. Well, I go to my dentist's plan and it's four hundred dollars a year, so it's less than the total premiums, and he covers thirty percent of the cost of treatment, and so I end up getting better coverage. for less than I was getting with my original insurance. Troy: Yeah, and you know, from the from the perspective of of both patient and dentist, there there tends to just be a lack of of awareness of kind of how those things fit together and and the underlying math of of both. And I think as dentists become more aware of their profitability, more aware and we'll talk a little bit later, but more aware of of what insurance really is as it relates to their business, like what it does to the the the business of their practice and hear from other people, hey, there's these membership plans that are great, th there's a movement towards it, but it doesn't tend to be super intentional. And and I think that's where the opportunity really lies. Is one, let's look at the architecture of the plan and make sure it's something that makes sense. I mean, is this something that is i i you know, is reasonably easy to sell. Can you make the case for a patient acquiring the membership plan? And the second piece is does it make sense for the practice? And as long as those two things line up, the story against most insurance plans, and there's some good insurance plans. We're not here to badmouth all insurance plans, but there's a lot that really don't work well for patient or practice. the membership plan, if designed the right way, r you know, really can fit nicely, but both parties are going to see that a lot more clearly if they better understand and are a bit more intentional about, you know, the the the economics of you know of of dental work. So Jeff: Yeah, there's I think very little downside for having a membership plan. you mentioned right before we got on that there are some states that do require they have a little bit more l legislative scrutiny on the membership plans. I think you mentioned Washington, but for sure, no matter who you are listening to this, consult with an attorney and and make sure that this isn't going to be something that you're facing legislation about or litigation that you're keeping your practice safe in in those. So I just want to give that disclaimer before we we proceed. Troy: Yeah, and and maybe just a little bit of color on that. the line between whether it's insurance and should be regulated like insurance, meaning the if the membership plan is insurance and should be rel regulated as such, or is outside of the umbrella, really is the question that's being, you know, that you need to make sure an attorney's looking at how your state treats that. I I I mentioned Washington just 'cause we'd looked at it and It's it's quite strict as far as we understand it. Again, consult with an attorney. We're not attorneys, but it looked like one that was fairly strict. and so there may be some some challenges, or at least you'll you'll wanna make sure if you're in a state that that that does view a membership plan like insurance and regulated by those the the state insurance regulations that you that you're just abiding that, but but yeah, it's it's something to be mindful of. Jeff: Yeah. And so to continue with the talk of the membership plan as kind of the alternative to insurance, one of the huge advantages we see is patient retention and referral rate. This is something where I tell everyone I talk to, especially people who I know go to my same dentist, that you have to go here and use the in-house plan. If you're if your employer isn't covering your insurance, there it's a no-brainer to do this because even though I'm still paying money. I am paying less and the dentist is making more than he would have if I was an insurance patient because there isn't that cost associated with the administration of insurance, but also just re getting the reimbursement and and billing through insurance. Troy: Yeah, a hundred percent. I mean it i if we maybe take a little bit of a step back and say, you know, why would you do this? Well, the reason why you're doing it is as you highlighted, Jeff, is there's evidence. I mean, it's not really overwhelming research on the matter, but the evidence suggests and even common sense suggests that it's gonna help it with retention. I mean, if someone's paid you, you know, to be a member of your plan, as long as you don't do something to offend them or drive them off or they don't move or something, there's certainly a default position that they're going to continue with you. Same thing with referrals. Once we're in, you know, we we like to tell people that about something that we feel like is a good a good deal. You know, there's something attractive about that. And so from the practices perspective, it really is a marketing effort. It it's the idea is to just help your business grow production numbers, grow profitability. So it's if we if we view it from the within the lens of marketing, it does a lot of really good things. From a cash flow perspective, if you're doing monthly payments or even annual payments, but a lot of people really like the monthly payment plan. Now you have a a a more consistent steady stream of of income of cash flow. So that's a positive thing. But let's Actually, look at or consider it as the alternative to the insurance model because insurance is really the same thing. It's a patient acquisition tool for dentists. They agree to accept insurance or get on their panels in exchange for that insurance company effectively providing them patients. that sounds that sounds okay. Until you really start looking and saying, okay, but what is the cost? And as those reimbursements have continued to become more and more punitive, in many instances because of rising costs and those reimbursements not getting or not keeping pace, that hurts on the one side, but what practices don't often think about or realize is that's their marketing cost. So if they're writing off say $100 for every cleaning, that is that is a hundred dollars that they're effectively paying for each of those patients. And the the bad thing about it is there isn't any retention as it relates to that marketing cost, if you will, because the next time they come in, you pay that $100 again. The next time they come in after that, again, you in the form of the write-off, you're paying to acquire them again. So insurance, you know, is a incredibly expensive form of marketing. So now we look at the the the membership plan as that alternative, and there isn't that ongoing cost. So even if there is a little bit of even if there's a little bit of loss in terms of the number of people that are involved in a membership plan versus an insurance, you know, a particular insurance company or insurance plan, the net dollars, the profitability, may be significantly more because you don't have that ongoing acquisition cost effectively or re the the write-off costs that you have with you know, with the patient on insurance. Jeff: Yeah, with insurance, you're paying that middleman where you can pass those savings, even if it's seventy five percent of them, if it's not a hundred percent of those savings, you can pass those to your patient so that they're paying that less, that difference between what they'd be paying for insurance, because the insurance has to make money and you have to make money, and so the patient is normally the one who gets stuck in the middle or you're the one who gets stuck in the middle. So either way, if insurance is gone, there's the opportunity for the patient to pay the same or a little less and you to still make a an increased profit. And the upside is that like you mentioned, Troy, it's not an ongoing expense for that patient. W you continue to get that patient to pay those those marketing dollars they're retained for the same amount. It's kind of like A referral is the best patient, best new patient because they're free from a marketing cost perspective. Obviously, there's a relationship that you built with your existing patient and stuff, but effectively they're free. Then you have kind of like an ads or general awareness, local campaigns that all have some variability of marketing cost associated with acquired patients. But those are all you'll pay at one time and then the patient comes in the door. And as long as you retain them, you don't. Keep paying, but with insurance, it's expensive up front and it's continues to be expensive the longer that they stay. Troy: No, that's that's exactly right. And and and the point that you bring up really is you know, is an important one. And and every practice, you know, has to internally develop their own strategy as it rights relates to the pricing and structure of of a membership plan. I mean the the bottom line is it's not gonna be successful. It won't do what a practice wants it to do. if it either doesn't financially work for the practice or doesn't financially work for the patient. And so finding that that appropriate middle ground, and that comes not only in the form of what are what are what's the initial or what's the ongoing membership fee, but also what are the the the benefits associated with it. And so you know there there really are some it's smart to take a fairly careful approach to really analyzing A couple of things. What is the value of the membership relative to what they're getting? Just even looking at it at at at the you know, the preventative treatments. What is what do you charge for a cleaning? What do you charge for that exam and those those x rays? are you including two a year? What's that total cost and how does that relate to membership if those are going to be included? You know, that's some basic stuff. But then you know, there's there's some some interesting interesting strategy depending on what particular services a practice really wants to to offer or see more of to engineer the plan to encourage those or to incentivize, you know, those those particular services. So there's a lot of the the structure and the pricing shouldn't just be thrown together without a lot of thought. There's really an opportunity to make sure, like in all marketing, That it's directed at the patient type that you're really trying to get, that it's intended to reinforce the type of services that you're wanting more of. And as long as again, it makes sense for patient and practice, there's really a great opportunity to, you know, to make to make that practice an effective marketing tool for for for your practice. Jeff: Yeah, and there's a lot of creative ways to play with how that charge gets applied. So like I know for our dentist, it's a membership fee and then a very heavily discounted preventative and cleaning fee that is a charge. But the membership fee is much lower and is inclusive of six people in a family. And so our dentist is using the membership to attract families. We live in Utah, there's a lot of big families, and so for him, he feels that is the best way for him to grow his practice But for other practices where they don't want to do that, maybe it's a $400 fee per individual and that covers your cleanings, and you h more heavily discount some of your higher value services, like maybe you give 20% off or the Donics, and you really are incentivizing. Hey, come to me, get your cleanings done, but you're paying this membership fee so that when you need braces or in clear aligners, you you have a great place where the cost is been defrayed over time by that. And so there are ways to creatively structure the do you have them pay for preventative or is preventive included? Is it for a single person or is it for a group of people? Is it for a single household or is it for multi household? how do you want to attract people? Because if I went to the dentist and he said, Hey, it's five hundred dollars a year, but you can bring eight friends. Well, his whole point, and you pay fifty dollars per cleaning. At that point, his whole point is to get referrals coming in of I want that person to just be a marketing engine for my practice. So he brings those people in. Now they're all paying together for that plan. Your attention's gonna be crazy because No one wants to lose people out of that root out of that membership plan. So you can really structure it in very creative ways. And I think that's what a lot of dentists aren't necessarily thinking about. They sign up with like pearly.co, which is great. There's lots of great online services and they do have flexibility, but a lot of them make recommendations and dentists jump to the first recommended plan thinking, well, it's worked for others, so why not for me? Troy: Yeah. Yeah. And again, as you're structuring it, reminder again, just make sure that you're checking to make sure that that with an attorney that that there isn't something that you're baking into the architecture and structure of the plan that that potentially runs the foul of state law. But to your point, Jeff, a hundred percent agree that it it should be viewed the same way that we view the ad strategy or ad copy, the same way that you view the website or or or any other marketing efforts you have is it should start by who am I targeting and what is the outcome I'm looking for. And as long as you're really focused on those two questions to start with, there really are a lot of different cr different opportunities or creative ways to to have it drive towards the people you want and towards the outcomes that you want. and and it and it shouldn't be viewed as a one size fits all. I think that's something that we've heard before is what's the best structure? And I not picking on Pearlie or any of the others. I think that that sometimes in the in the industry when they're looking to manage, they offer this is the best this is the best structure. And there's probably some underlying backbone or there, you know To what they're saying that, hey, if we get this, you know, the this this skeleton that has certain features, that that is something that's proven to be more effective. So I'm not disputing that there are maybe some best practices in that regard. But at the same time, when you're really fleshing it out and and saying, okay, what does this really look like? It still needs to start with who is our our target community, who's our target clientele? What is it that we're wanting to be the outcome? of this membership plan and you know though that analysis, like in any marketing, that analysis produces a different perspective that you will get from just looking at a cookie cutter solution. So Jeff: Yeah. Well, and that goes back to what we talked about last week. And if you haven't listened to that episode, I would highly recommend checking it out because it ties in very well with this. But Google Ads is the exact thing that you're talking about. When dentists go to marketing agencies and they get the same cookie cutter ad strategy, well, that's that's what's created the problem that we have in the dental industry right now, is that everyone is trying to look for the best, but in order to be the best for everyone, for all dentists, marketing agencies have to kind of pick a place and plant their flag. And that ends up driving to sort of an average that i is a lot of general patients. They may not be the highest quality. That's the way Google works though, is they want kind of that average that average push and that's how they're ranking you is against kind of what do they see as best practices. And so when you're getting a best practice in-house plan, it's the same thing where you're getting what people have seen works and it works well across a lot of dentists. But the problem is dental practices are so unique, practice to practice, even within the same market, you have 50 practices that all could have completely different focuses. And yet may all be using the same marketing strategy from ad and ads perspective, but also the same marketing strategy from a in-house plan perspective if they've all signed up with the same kind of what's the best practice? It's like going to YouTube and saying, How to run an in-house plan. Well, if you watch the same video as every dentist in your market, you're gonna do the same thing as every dentist in your market, in spite of the fact that dental practices are so unique. Troy: Yeah, a hundred percent. You you'll hear us keep on saying, you know, that differentiation is really where the opportunities lie moving forward. You know, that the book is closing on, you know, what we've referred to as yellow pages thinking, which is just get a somewhat generic message out to as many people as possible. you know, that model just the the writing on the wall is awfully clear that that that book is closing and it's time to really look at how do you differentiate and and this is just one more opportunity to do so. Jeff: Yeah. And it's a great marketing opportunity that doesn't necessarily feel like marketing. You don't have to feel salsy when you're offering something that we've seen time and time again. It's good for the dentist. It's good for the patient. It it allows them access instant access to care. There's no waiting periods. The coverage, depending on how it's structured, doesn't have these low maximums like a thousand to fifteen hundred dollars where it's like barely covering a single crown. So the patient's getting better treatment. The dentist is having a much better experience with that patient where they they prescribe treatment and the patient doesn't say, Does my insurance cover this? And then settle for something that's just a band-aid fix or the kind of the bare minimum to get them across the line because that's all insurance will cover. Troy: That's right. So it's it's another area to just look at, the opportunities for improving your market marketing and improving your market share. Jeff: Yeah. So if you'd like to talk with us about what this looks like for your market and your practice in in particular, we will have a link in the show notes to book a call. We'd love to chat with any of you about kind of what your market looks like, what opportunities we see, what opportunities we see for the in practice plan. And again, we aren't attorneys, so we will make best recommendations. We do recommend everyone go to an attorney and make sure that. It's it's above board for their state and where they're operating. but if you'd like to book a call, that'll be in the show notes. We'd love it. If you found value, if you'd subscribe, leave a review. it really helps us get the word out to more dentists about all of these different marketing strategies and business opportunities that dentists have. as dental practices are a very unique business for a lot of reasons. We're grateful you're here and wish you all the best with growing your practice and look forward to seeing you next week.