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Legal Services

By Dan Schulte, J.D.
MDA Legal Counsel
From the November 2008 issue of the Journal

This summer Delta Dental announced payment policy changes affecting their Michigan participating dentists.  Apparently, a Delta Dental “system upgrade” now enables it to compile “credible data” that Delta Dental has used to determine a maximum fee participating dentists may charge for certain procedures. This maximum fee is called the “Maximum Plan Allowance.” Composite filings and porcelain crowns are now subject to a Maximum Plan Allowance. Other procedures will also be subject to this once Delta Dental feels it has “credible data” to establish a Maximum Plan Allowance.

This means Michigan dentists who participate with Delta Dental may no longer charge any patient enrolled in a Delta Dental underwritten or administered dental plan a fee exceeding the Maximum Plan Allowance. Contrary to past practice, the Maximum Plan Allowance applies whether or not the patient actually has coverage provided by the Delta Dental underwritten or administered plan. Delta Dental has taken control of the fees participating dentists charge these patients even when only the patient is liable for payment of the fee and would be willing to pay a higher amount for a non-covered service.

For example, let’s assume your patient is enrolled in a Delta Dental underwritten or administered dental plan. The plan provides that either Delta Dental or the plan’s sponsor (usually the patient’s employer) will pay $50 for the procedure you just completed on this patient. Delta Dental has established the Maximum Plan Allowance for this procedure to be $135. The fee you customarily charge for this procedure is $150. Under Delta Dental’s new payment procedures, the most you can balance-bill the patient is $85 (the difference between the Maximum Plan Allowance and the amount Delta Dental pays). It is no longer $100 (the difference between your customary fee and the amount Delta Dental has paid). The $15 you used to collect from the patient (and presumably the patient agreed to pay for the procedure) is now lost. Delta Dental is prohibiting you from collecting it.

Questions raised

Many questions have been asked regarding Delta Dental’s new payment policies. What members want to know is whether Delta Dental can legally: (1) establish a maximum fee for services that are not covered by a Delta Dental underwritten or administered dental plan; (2) restrict participating dentists from balance billing for services that are not covered; and (3) unilaterally amend the participation agreements to impose these new restrictions?

The answers to all of these questions depend on the terms of the contracts in place between Delta Dental and its participating dentists. We have reviewed the DeltaPremier Fee-For-Service Participation Agreement and the Uniform Requirements by Delta DeltaPremier Participation. I will refer to these two documents collectively in this article as the “Contract.” 

Delta Dental is literally construing and broadly interpreting the Contract. Whether and to what extent dentists understood and/or intended the Contract to have such a broad application can only be determined upon a review of the facts and circumstances of each individual case. The circumstances surrounding each individual dentist’s interactions with Delta Dental both at the time the Contract was signed and following its signing may give rise to defenses to enforcement of the Contract on an individual basis.

The Contract requires participating dentists “to provide dental care to enrollees” in accordance with the terms of the Contract. The Contract is not limited to only that dental care that is covered in some fashion by the enrollee’s plan. Instead, it applies to all dental care provided to any enrollee. “Enrollee” is defined in the Contract to include any patient eligible for dental benefits pursuant to any dental program that is either administered or underwritten by Delta Dental or another entity that pursuant to an agreement with Delta Dental has made the Contract applicable.

Therefore, the Contract applies when Delta Dental is:

  • actually underwriting the funding of the benefits provided to the enrollee;
  • when Delta Dental is merely processing claims and otherwise administering the dental plan for a third party (usually the patient’s employer) who is funding the benefits; and
  • when Delta Dental merely sells to a third party the right to use its network of dentists.

Therefore, when read literally the Contract allows Delta Dental to set maximum fees for services provided by participating dentists even though there is no coverage or only partial coverage by a dental plan for the service.

Balance-billing limited

The extent to which participating dentists may balance-bill a patient is also governed by the Contract. Specifically, the Contract restricts a participating dentist’s ability to balance-bill a patient for an amount in excess of “the maximum fee that Delta Dental approves for the service. Again, the Contract makes no distinction between covered services and services that are not covered.

Finally, the Contract gives Delta Dental power to amend the terms of participation. Included is “the right to make changes in its Processing Policies and the Uniform Requirements of DeltaPremier Participation.” Therefore, Delta Dental has the contractual right to change at-will any of the terms of participation, including the setting of the fees you charge any patient enrolled in a Delta Dental-underwritten or Delta-administered dental plan.

Obviously, many member dentists are upset about these changes. Many have said that they have never been subject to fee limitations by Delta Dental or any other payor applicable to non-covered services. Even more have indicated that they had no idea the Contract could be applied in this way and that this was never explained to them at the time they signed the Contract.

Participating dentists have four choices, as explained below:

  1. The first is to accept the new Delta Dental policies and limit the amount of your balance billing to the Maximum Plan Allowance.
  2. The second is to continue balance-billing up to your customary fee as you have in the past. The risk you run, obviously, is that Delta Dental will terminate your Contract and take action against you for breach of the Contract. Delta Dental has the right to terminate your Contract at will upon 30-days written notice.
  3. Third, you may likewise terminate your Contract by providing 30 days written notice to Delta Dental.
  4. Finally, you may stop providing certain services to Delta Dental Enrollees if the Maximum Plan Allowance is not at a level acceptable to you.

Selling a network

Another question that has been frequently asked is why Delta Dental would limit fees for services that patients know are not covered by the terms of their dental plan and for which patients have been willing to pay. The answer to this question has more to do with how Delta Dental uses the network to generate income then it does the delivery of dental care and/or patient choice.

Delta Dental generates income primarily from the sale of dental insurance and dental plan administrative services.  The ability to control the amounts paid for dental care (whether by Delta Dental directly or by the sponsor of a dental plan administered by Delta Dental) makes its insurance products and administrative services more attractive to its customers. Delta Dental’s ability to control the cost of dental care varies directly with the size of the network of dentists and the scope of the fee limitations the participating dentists have contractually agreed to.

Therefore, having a large network of dentists who have agreed to a broad scope of dental services for which control of fees has been given up results in a significant competitive advantage for Delta Dental in the sale of its underwritten dental insurance products and dental plan administrative services.

This advantage is the centerpiece of Delta Dental’s recent advertisements, which state:

Your Company Deserves a Deeper Network

The Delta Dental system includes three of every four dentists - which makes our network the biggest in the nation. Offering your employees access to the deepest networks improves the chance that their preferred dentist participates in one or more of our plans. That, in turn, helps us deliver greater plan savings to you. So if you are not with Delta Dental, shouldn’t you be? To learn more about Delta Dental, please contact your broker or visit DeltaDentalMI.com.

Delta Dental is acknowledging that greater plan savings for their customers result directly from “the deepest networks.”

Individual dentists must make their own decision how to react to Delta Dental’s payment policy changes.

The Michigan Dental Association cannot legally and will not facilitate any joint response to these changes on behalf of MDA members. To do so is illegal, violating federal and state antitrust laws. The purpose of this article, and future communications to come, is to educate MDA members about what these changes mean and why it is in Delta Dental’s interest to implement the changes.

See the November 2008 MDA Journal for a special editorial on Delta’s changes, as well as a response from Delta Dental.

Posted in: Insurance

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