It’s shouldn’t come as a surprise to anyone that dental costs go up over time. There could be several reasons why, depending on the type of coverage you have, but a key reason is trend.
Trend is the rate of change in dental costs due to changes in dentist fees and patient utilization. It’s usually expressed as an annual rate. Recently trend has been at near all-time-low levels, both for Delta Dental of Wisconsin and throughout the industry.
Trend has three main components: fee, utilization and intensity.
Fee increases occur when dentists increase the amount they charge for covered procedures. Delta Dental helps control fee trend by establishing fee schedules with dentists that cap the fee for each procedure.
Over the past 15 years, industry fee trend has run from 3 percent to more than 6 percent, with the average between 4.5 percent and 5 percent. Due in part to the sluggish economy, fee trend over the last two to three years has been roughly 3 percent to 3.5 percent, the lowest in the last 15 years.
Utilization is the number of procedures per covered member. This is a function of the patient, the dentist and the plan design. Generally speaking, the richer the plan design, the more likely patients will use the plan.
Patient-utilization patterns can change significantly over time because of plan changes, anticipation of loss of coverage, changes in disposable income, and response to marketing. Also, dentists can impact utilization by recommending (or not recommending) certain procedures. The number of procedures per member per month can sometimes change by more than 5 percent in comparing two rolling 12-month periods that are just three months apart.
While utilization can vary significantly in the short term, long-term changes are more gradual. The slope of the best-fit line over the last several years has been only slightly positive. Recognizing the long-term trend helps to keep overall trend estimate relatively stable – and this contributes to overall rate stability for Delta Dental customers.
Most of Delta Dental’s plan designs encourage members to use preventive and diagnostic services, which should reduce the long-term utilization of many basic and major services.
The third component of trend is intensity of services. Here’s what we mean: Assume the mix of services for one block of business is broken up 40 percent preventive and diagnostic, 30 percent basic and 30 percent major. Then, assume another block of business with the same fees and the same total utilization has a mix of services that is 50 percent preventive and diagnostic, 25 percent basic and 25 percent major. The total cost for the second block would be lower because the usage is more heavily concentrated in lower-cost procedures.
For any specific block of business, the intensity of services will shift over time, producing intensity trend. This type of trend is normally not too large in magnitude over short periods of time, but can be fairly significant over several years.
Oral-health changes across the insured population have an impact on intensity trend. For example, the number of cavities per child today is lower than it was 30 or 40 years ago.
Intensity trend can also be affected by changes in technology and services being offered. For instance, implants and teeth whitening are now widely available and increasing in frequency.
For most of the last five years, intensity trend has been slightly negative, which means a greater concentration of lower-cost services. However, recent data indicates that intensity trend could be turning slightly positive as the economy improves and people have income available for higher-cost, discretionary services.
Trend has a lot of moving parts, and Delta Dental is actively involved in forecasting long-term trend and trying to minimize and stabilize trend. We’ll keep you posted on how we’re doing.
