Optimizing Your Network Fees: An Actuary’s Insider Perspective

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Actu-What?

Actuaries are mathematicians who use probability and statistics to analyze claims data. They work in many industries, from auto, home, life, and health insurance to pensions and financial services. Actuaries are trained through a series of rigorous exams administered by the Society of Actuaries.

Dental insurance companies employ actuarial teams to serve as the financial stewards of claim reserves. These teams analyze historical claim patterns and trends to forecast future liabilities. For example:

• If a dental benefit plan raises the annual maximum from $1,000 to $1,500, how much will this increase overall costs to the insurer?
• If fluoride is no longer covered, how much would the insurer save?
• If a group practice drops out of the network, what impact would it have on costs for both the insurer and members?

These are the kinds of problems tackled by the actuarial team, the math nerds!

In fact, actuaries at dental insurers contribute in a variety of key areas:

• Claim Reserves: Ensuring the insurer has enough capital set aside to pay incurred claims.
• Pricing: Setting premium rates based on expected risk, considering demographics and benefit design.
• Financial Reporting: Providing enterprise clients with reports that outline dental plan utilization and financial performance.
• Network Management: Collaborating with the network team to establish fee schedules that align with financial, sales, and growth goals.

The process of setting a fee schedule for a dental office occurs in two phases. First, let’s examine the macro level.

At least once a year, insurers assess the overall standing of their networks. Most dental insurers use one or more network surveys provided by actuarial consulting firms like Milliman, Mercer,

or Fluent. These firms collect claims data from multiple insurers and offer a Metropolitan Statistical Area (MSA) breakdown, showing how each insurer ranks in terms of network discount and size.

The actuarial team highlights this data for leadership, making recommendations for MSAs where fee schedule adjustments may be needed. Adjustments are guided by the insurer’s strategy, balancing discount competitiveness with network growth goals. While every insurer wants deep network discounts, they also recognize that maintaining or expanding a provider network may require increasing fees.

Management then incorporates actuarial insights, sales data, and competitive pricing intelligence to decide whether to adjust fees in specific geographic areas. Actuaries are integral to these decisions, as fee schedule changes directly affect future claims costs.

Unfortunately, some networks stop at this macro-level approach. In these cases, the insurer sets an MSA-level fee schedule, and individual practices must simply accept it or leave. If your zip code already has strong network coverage, the insurer may see no need to negotiate.

However, many insurers take a more flexible approach. They start with a standard fee schedule for each area and allow network representatives some discretion when recruiting practices. These reps aim for a steep discount but can increase fees slightly if they stay near the target discount range.

How much flexibility reps have depends on:

• The size of the existing network in that area
• The unique strengths or leverage of your individual practice

I hope this behind-the-scenes perspective helps you better understand how insurers operate. Here are eight practical tips, based on my 17 years in the insurance and network space, for improving your chances of negotiating a higher reimbursement:

1. Know Your Practice Model: If you focus on Medicaid, DHMO, or Medicare, you’ll need a high-volume, efficient workflow to offset low reimbursement. Premium practices shouldn’t join DHMO networks and then complain about the fees. 2. Grow Your Practice: Bigger practices generally have more

negotiating power. 3. Deliver Outstanding Patient Care: Insurers listen to their members, especially if those members are HR directors or executives at client companies. 4. Attract High-Profile Employers: Serving employees from top companies like Google, Amazon, Coca-Cola, or local unions increases your network value and leverage. 5. Leverage Technology: Treat insurers as partners, not opponents. Use tools for automated claims submission, eligibility checks, and electronic payments. These solutions benefit both sides. 6. Avoid Red Flags in Care Patterns: Insurers now use data science to detect anomalies. Practices with unusual ratios, such as excessive periodontal maintenance, may lose leverage or even be removed from the network.

1. Build a Relationship with Your Rep: Strong relationships matter. While reps may not set fees themselves, they can advocate for you internally.
2. Read the Fine Print on Opt-Outs: In some states, insurers can’t legally auto-enroll you in a new network without notice, but they may still try. Watch for opt-out notices to avoid being locked into a lower-fee arrangement.