Dental Insurance, Value-Based Dental, and Beam Benefits

Why doesn’t dental have value-based care?

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TL:DR

Beam Benefits is building a new dental insurance carrier that utilizes a smart toothbrush and provides dental insurance to small-medium sized businesses.

Their goal is to push the dental industry towards more value-based care practices. They’re going to have to deal with competition from larger carriers and dental practices plus test their underwriting skills.

We also go through what dental insurance is, whether it’s a good deal, and some parallels between health insurance and dental insurance.

This is a sponsored post - you can read more about my rules/thoughts on sponsored posts here. If you’re interested in having a sponsored post done, email nikhil@outofpocket.health.

Company Name - Beam

The artist formerly known as Beam Dental is now called Beam Benefits. They started with a smart toothbrush in that weird “internet of things” phase where we were making everything smart for no reason . They have since expanded to dental insurance because everything eventually becomes fintech or healthcare, so why not both.

Beam is actually the acronym B.E.A.M (Brushes Expand Addressable Market). You’d think it’s about beaming smiles, but it’s not that and it’s definitely this niche investor-only related reference.

The company has raised a total of $225M from Kleiner Perkins, Drive Capital, and Georgian Partners.

How dental insurance works today

Let’s start by talking about the basics of dental insurance. Don’t ask me questions about why nearly all your face holes have different insurances, I cannot answer that.

There are some similarities to health insurance:

  • You pay premiums each month that include certain preventive services underneath it. Usually 2-3 cleanings where you straight face lie to them about how often you floss, some x-rays where they say it’s safe then run 100 feet in the other direction, maybe fluoride/sealants, etc.
  • Most plans have a deductible that you have to hit before they’ll cover other services - it’s usually $25, $50, or $100 depending on the plan. Many have co-insurance on top of that where you pay a % of services and the dental insurance company pays the rest.
  • Dental insurance has plan designs with similar acronyms like Health Maintenance Organization (HMO - restrictive network but cheaper premiums), Preferred Provider Organization (PPO - open network, more expensive premiums), or SOL (Shit Outta Luck). Most will do some level of out-of-network coverage and give discounts they’ve negotiated for in-network.
  • You probably don’t understand any of the above and ask someone else which one they have and just get the same.

Below you can see an example of how Beam’s dental coverage looks.

BUT, there are some very key differences you need to understand between dental insurance and health insurance.

  • Dental insurance has plan maximums - This is the maximum amount a plan will cover in a given year and after that, you’re on your own. Theoretically this maximum is to guard against a bunch of elective/cosmetic dental work, which seems like a pretty blunt instrument for that goal. I might be suggesting that prior authorizations would be good here, but I don’t want the dentists reading this to waterboard me in the chair.
  • When something is considered medically necessary, it usually moves to health insurance coverage - For unexpected catastrophes like a traumatic face injury, surgery to deal with infections, etc. would be medical. There seems to be some gray areas, like if you’re getting a wisdom tooth out preventively it’d be dental, but if it’s taken out as a precondition to getting chemotherapy it’d likely be medical.
  • Dental has a lot of strange carve-outs and plan design quirks - You might think something is covered and then later discover it isn’t. For example, coverage may only kick in after 6 months or many have “missing tooth” clauses where it won’t cover teeth missing before the policy goes into effect. They might even have a clause that ends coverage if you’re not subscribed to the Out-Of-Pocket newsletter, so just be safe.
  • Dental insurance is loved - Haha nah I’m just kidding, no one loves any insurance product.

Dental is “kinda” insurance. There are pretty low maximums they’ll pay out per year (e.g. the most my dental plan will cover is $1,500/year). For most serious things like tooth extractions, implants, etc. you’ll blow right through that max. For emergency issues medical insurance will kick in, so it doesn’t really feel like what you might think when you hear insurance. Seems misleading from a marketing perspective.

But is it a good deal? Honest answer is it totally depends on your situation. Lol I am not good at writing sponsored posts.

Dental premiums for an individual on average seem to be somewhere between $30-60/month (Beam’s average is $31/month). A cleaning + x-ray paying by cash seems to be in the ballpark of $150-300 (source). Dental insurers do negotiate better rates with their in-network providers, but because of that, many dentists choose to stay out of network and go cash only.

If you go to the dentist at least 2x a year (which is the recommendation), then it pretty much pays for itself. In fact, if you’re not going 2x a year, the insurance company wins, so see the dentist just to beat “big dental insurance”. For most people, their employer covers a large chunk of it, so it’s worth it just to get the free cleanings.

If you get anything on top of that (e.g. fillings), then you get some peace of mind knowing at least a portion is covered. Just don’t kid yourself that this is going to cover everything and read your plan carefully.

[I’ve gone to the dentist a few times this year and have been surprised at how quickly the dentist/insurance can at least answer the question of whether something is covered or not. Sure, the answer is frequently no, but at least I have yet to be surprised. This is unlike health insurance, where I’m wondering if I’m going to have all my kidneys repossessed in six months because I went to an out-of-network urgent care.]

Dental and Medical Insurance, The Parallels

While doing some research for this, I started noticing that dental insurance is an interesting bizarro universe that looks a little like health insurance used to before the Affordable Care Act (ACA).

  • Dental plans can include pre-existing conditions into underwriting and have it as a part of their policies (e.g. that missing tooth clause).
  • Dental plans don’t have a medical loss ratio. Medical loss ratios say that health insurance companies have to pay out 80/85% of the premiums they collect into medical claims.
  • Dental plans can have things like annual limits/maximums they’ll reimburse a patient. Health insurance plans used to have this as well pre-ACA.

Dentistry is very different from traditional medical care for lots of reasons, namely that there basically aren’t many serious dental emergencies that require complex care or overnight stays. Those emergencies are mostly covered by medical insurance anyway.

So because of all the dynamics above, the dental care experience is probably the closest thing we have to a true consumer shopping experience in healthcare. You schedule appointments, shop around, and dentists compete on price, availability, and experience in exchange for more patients. There’s also a lot of upselling and potentially low-value or unnecessary care.

Idk if you’re in the camp of the free market will solve healthcare; if so, the dental industry is probably what you should study. Both for the good parts and its flaws, which we’ll talk about.

What is the business model of Beam and who is the end user?

About 2/3rd of people in the US have private dental coverage. A very small number (<10%) buy individual dental plans.

So most people get dental coverage through their employer, but it was surprisingly hard to find national data on how much the employer actually contributes. I got a few random quotes for small group insurance and it looks like employers contribute about 50%. I asked a sample of friends that worked at larger companies and the employer covered 80-100%.

There’s been a lot of growth in public dental plans thanks to Medicaid expansion covering dental in many states and Medicare Advantage plans now offering dental as one of the most popular supplemental benefits.


Source

Beam is a dental insurance company, so their business model is pretty straightforward. Employers and employees pay premiums to the company, and the employees are the users of the product itself.

What does Beam do?

Beam offers dental insurance that largely targets small and medium sized businesses (2-1000 employees). Many parts of it look like a traditional dental insurance company, but they have a few twists.

First, Beam started by making a connected toothbrush + custom formulated toothpaste. This toothbrush allows users to gain points for consistent brushing which they can use for other dental stuff, gift cards, etc. And if they’re inconsistent, they send the data to your parents with the subject line “thought you should see this”. They include the toothbrush in their plans.

And second is that they offer more specific pricing on a per employer basis using a different underwriting methodology. Their claim is this helps them price premiums more accurately, especially for small businesses who may not have historical dental claims data available. More accurate pricing also means they can give better pricing to employee populations who they think might be healthier vs. carriers that give them geography level pricing (also known as shelf-rating).

I asked them to share some of the things they use in underwriting and immediately regretted it as soon as I saw this table looking thing and quietly closed it out. Some variables:

  • Geography: Adjusts for nuances in a geography (how much penetration does Beam have, whether the local water is fluoridated, whether their grocery stores still have that cereal that was just Oreos as breakfast, etc.).
  • Group size: Adjusts for selection bias within the size of employer.
  • Industry: Adjusts for behavior bias within a given industry. Working at a Candy Shop gives a 50 cent premium increase. I am very lame.
  • Employer contribution: Adjusts for behavior bias depending on how much the employer subsidizes. You know I’m milking them for all they’re worth!!! (I’m a single person company).
  • Employee age: You’re 30 and just started flossing, admit it.
  • Actuarial value: Adjusts for selection bias while choosing benefits.

Finally, Beam focuses a lot on the tools and interfaces for brokers and users. They have self-serve tools that allow brokers to generate quick quotes for a given employer. And users get the table stakes things you’d expect from most other shopping experiences - a mobile app that actually works, digital insurance card, yada yada yada.

Dental Value-Based Care?

Beam’s current product isn’t exactly rocket science, it’s bringing basic tech principles to the dental insurance segments. But it’s not something I’d traditionally write about on its own.

What was interesting to me about Beam was that they reached out after this tweet because they aspirationally want to move the dental industry to a value-based care system. Right now it’s virtually all fee-for-service. I could find a handful of examples of paying for certain quality measures in areas like Medicaid, but that’s about it (e.g. here’s one for Texas).

Now that I’ve spent 5 hours reading about it and listened to one podcast, I can expertly opine that the dental industry seems like it has the perfect storm of things to make it a good candidate for value-based care.

  • People already go to the dentist regularly. This survey suggests 64% go at least once, and skews younger. Sure it’s probably for vanity purposes, but they still go. There seems to be less of a struggle in dental land to get people in the chair, so changing behaviors or doing preventive stuff becomes easier. This is especially true since many younger people go regularly even before they have issues, vs. healthcare where the percentage of people that see a primary care physician is similar but skews older and already sick.
  • A big issue for dentistry seems to be unnecessary procedures. Because the dental cleaning gets reimbursed way lower, there’s an incentive for dentists to use that to either upsell you into more cosmetic things or nudge you into certain procedures you may not need. Last time I went to a new dentist, he negged me by asking if I drank coffee a lot and suggested a new whitening procedure they specialized in lol. That’s pickup artist level stuff.
  • The actually expensive stuff all falls into pretty clear and discrete episodes of care (e.g. a wisdom tooth extraction) with relatively low variance in outcomes. Sure a patient might eat your mom’s cooking and crack a crown. But at a high level you can tell who did what correctly.

This feels like a place to explore bundled payments for the procedures, and maybe even shared-risk or capitated payments for taking care of patients for longer periods of time. If all these words sound like nonsense to you, refresh yourself with the value-based care post.

So why hasn’t value-based care happened in dental? Well the first and most obvious is that just like hospitals, most dental clinics aren’t exactly fighting for it since they do pretty well in fee-for-service. Trying to get them to switch is like pulling teeth (I can hear your groans from here).

But as I went down this rabbit hole, there was a bigger issue. Dental has a conspicuous lack of quality metrics, evidence-based practices, and data to inform both of those things. For example, I couldn’t find any data that said you need to see the dentist twice a year; it just seems to be an accepted fact? Several meta-analyses basically concluded “ehhhh we actually can’t tell lol”. Dental insurance might not even be a deal if you don’t need to go 2x a year.

There are a handful of things that do seem to have strong supporting evidence, like not brushing with fluoride toothpaste can increase the chances of getting cavities (“caries” for people who also say “supper”). It’s pretty hard to create value-based care arrangements if there isn’t consensus around what can definitively avoid higher cost issues down the road.

Beam believes that to move to a value-based care system, the first step is generating data that we can interrogate to understand if outcomes are improving. The first step is a smart toothbrush, dental claims data, and a portal people actually input usable information into.

In a future state, Beam wants to do things like:

  1. Offer second opinions on treatment plans and scans to make sure what you’re being told is actually necessary.
  2. Start incorporating oral microbiome data to figure out the role of genetics and how they impact dental outcomes.
  3. Start creating quality metrics scores for dental providers based on how good they are at different procedures.
  4. Potentially even start their own clinics. I wish someone wanted to be me as badly as every insurance company wants to be Optum.

Job Openings

Beam is hiring for a few different roles:

You can see all the roles they’re hiring for here.

___

Out-Of-Pocket Take

There are things I like about Beam’s approach.

Better user experience - I know saying stuff like “they have a better app” can seem cliche. But I’m just going to say my last dental insurance carrier who shall not be named had such an incredibly awful web and mobile app that I know there can be a massive DELTA in experience. You can actually see what Beam looks like in Demo mode if you download the app and tap the Beam logo 5 times on some Konami Cheat code shit.

In an industry that is actually very consumer shoppable, it seems nuts to me not to have a good mobile experience. And yes, I love getting rewarded for things I’m doing anyway. Who doesn’t like free money???

Their value-based care vision - Most dental practices don’t have a ton of incentive to shift to value-based care. So It makes sense that the payer side would be the driving force here. It’s an ambitious and differentiated vision for Beam to pursue if they go that route.

Beam is trying to create data that would be needed to get into value-based care arrangements, build underwriting capabilities required to be in those arrangements, and have a user experience that would allow them to actually nudge and make suggestions to patients outside of the dental clinics themselves.

Targeting SMBs - I think it’s good to target small to medium sized businesses if you’re a company like this. They’ll care about the customer experience and perks aspect + there’s likely a higher variance in the dental risk pools and cost between them, so you can potentially have some advantage IF you have a good underwriting methodology (big if).

Large firms are well-served since 92% offer dental plans already. So you’d most likely be competing on price in that segment, which puts Beam at an inherent disadvantage since Beam probably can’t undercut on price. Smaller firms are underserved, more than a third don’t offer dental benefits at all, so there’s room to target them.

Source

As with any company, I have a lot of questions when thinking about a company like Beam.

The employer distribution issue - I think I’ve made it pretty clear through the course of Out-Of-Pocket that I think having such intimate employer involvement in healthcare benefits is a huge distortion for the entire industry. I think the dental insurance industry suffers the same kind of distortions.

Their CEO Alex Frommeyer (Fro) talked about wanting to hopefully one day get into the individual plans that were independent of employers, but starting there would basically be financial suicide. Because there are no mandates to get dental insurance and you can enroll year around, members in the individual marketplace buying dental insurance are doing so usually because they’re about to get some serious work done. The individual marketplace plans price that in and that’s why they’re drastically more expensive.

Fro said once they build a large enough book of business, they can eventually get into the non-employer areas. But for now, the system is set up to incentivize employers to be the primary distributors of dental and they’re playing within those constraints.

If the company ever does want to move meaningfully into value-based care, the employer distribution angle will be tricky to make long-term dental health investments since people leave their jobs so frequently.

Competition - Dental insurance is largely a network and negotiation game, so there’s a huge benefit to size and bundling. Many of the largest dental carriers end up getting bundled with health insurance because employers just want to check off both boxes. And the negotiated rates large carriers are able to get with dentists are better since they drive more volume.

Beam is currently targeting more underserved small business segments and relying on cheaper priced plans + a better experience. Could some of these larger plans underwrite and price cheaper using the data they have in-house eventually?

Source

Another vector of competition which is particularly relevant is dentists now offering their own financing plans and savings plans that have a lot of similar characteristics to dental insurance. If patients are already super loyal to a dental practice, then they might consider going that route instead.

Underwriting - A lot of insurance companies have tried better underwriting using technology, but giving cheaper products to get users is the easy part. The real test of the underwriting is when the claims are actually getting paid out. Beam is somewhat insulated from any massive mess ups since dental has annual payout maximums, but there’s always a big question mark when a startup makes a claim about underwriting. I guess Beam is quite literally putting their money where their mouth is. (I’ve been waiting all post to make this joke.)

Conclusion + a few notes

Beam is starting in the world of traditional dental insurance but wants to be bigger than that.

The free market aspect of the dentistry world has the pros of more shopability and competition, but also now faces some headwinds that might make value-based care more appealing.

  • Thanks to things like widespread fluoridation of water and toothpaste, people are getting less cavities. That’s great for people, but makes the economics of a dental business a bit trickier if people need less procedures.
  • The rise in government-sponsored dental plans via Medicaid/Medicare will likely mean more oversight and cost containment measures.
  • There’s rampant growth of private equity dental rollups, which as I’ve talked about before, just amplifies whatever the current incentive system is. There are some pretty horrifying investigative pieces about some of the PE-owned chains.

Whether or not value-based care is going to be good for the dental industry vs. just adding lots of administrative burden is up for debate. But bringing more data to the dental field seems like a good goal to pursue, and it’s cool that Beam is trying to push the industry in that direction.

And if you’re getting dental insurance, just make sure you understand what your plan actually covers.

Thinkboi out,

Nikhil aka. “I’m made to be on dental insurance brochures”

Twitter: @nikillinit

IG: @outofpockethealth

Other posts: outofpocket.health/posts

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