Name: Joseph A. Nagle
Age: 43
Position: President and Chief Executive Officer of Delta Dental of Rhode Island.
Background: Previously, he served as the company’s executive vice president and chief financial officer. Prior to joining Delta Dental in 1992, Nagle was a founding partner of the Capstone Group, Ltd., a health care consulting firm. He is a former vice president for strategic planning and product development at Blue Cross & Blue Shield of Rhode Island, as well as a vice president and chief financial officer for United Health Plans of New England. A certified public accountant, he began his career with Ernst & Young.
Education: Providence College (1978)
Family: Married, two children
Residence: Scituate
DELTA DENTAL OF RI’S BOSS, Joseph A. Nagle: ‘Rhode Island is one of the leaders in…coverage and richness of benefits.’
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PBN: Tell us about Delta Dental of Rhode Island in terms of its structure and how it operates. Is it in fact part of a national Delta Dental system?
NAGLE: Delta Dental of Rhode Island is a member of the Delta Dental plans across the nation. It is a national association of plans that cover all 50 states. Delta of Rhode Island had its inception in 1959. It became operational in 1973. The Delta association nationally is the largest provider of dental administration and insurance – and also the fastest growing. Locally, the Delta plan, as I said, has been in operation since 1973. For the first 20 years of its corporate history Blue Cross & Blue Shield of Rhode Island managed it under a contract. There were a lot of synergies and symbiotic benefits from that relationship. The two plans split, operationally – effective in January 1993. Delta is now independently managed and is, in fact, a competitor of Blue Cross.
When it was administered under an agreement with Blue Cross & Blue Shield of Rhode Island was it called Delta Dental?
Yes. It was under an administrative contract. It wasn’t owned by Blue Cross. At that time, dental insurance was in its infancy. The Blue Cross medical insurance product had been around for roughly two decades at that point. It was a natural fit to expand the product line. The Delta plans across the country generally were formed as not-for-profit dental service corporations, similar in structure to the Blue Cross plans. They had their genesis in the local state dental associations, which helped get them started. At this point, almost without exception, Delta plans nationally are competitors of Blue Cross.
Prior to this, did Blue Cross not have a dental plan?
Delta was really the first foray into dental insurance on a national basis.
And then they decided to go at it on their own?
Exactly.
What percentage of Rhode Island employees have Delta Dental?
There really aren’t any reliable industry statistics, but I’ll do my best to try and estimate it. There are approximately 1 million people in the state of Rhode Island – that number has held fairly constant for years. On a national basis, a common estimate is that roughly 40 percent of the population of the mature dental market would have dental insurance. So in Rhode Island we would say 400,000 people may have that. Delta Dental of Rhode Island, as of Dec. 31, 1999, had passed the 440,000-member mark. We have grown since that point and are now approaching half-a-million members. So we obviously have more of the market or there is something else at work here. Ourselves and the Blue Cross plan locally – which we are about two-and-a-half to three times the size of in terms of dental enrollment – make up the vast majority of the dental market in the state. Of our half-a-million members, a number are from out of state. Approximately three-quarters of our members are Rhode Island residents or residents of communities in nearby Massachusetts.
It sounds like a fairly high percentage of Rhode Islanders – compared to the rest of the country – have dental insurance?
Rhode Island is one of the leaders in terms of the extent of dental coverage within the population as well as the richness of benefits. The benefit packages that have historically been sold to Rhode Island companies, for example, would have 100 percent coverage for crowns. They would have orthodontic coverage. It is far less common across the country to see that extent of coverage without a greater cost sharing on the part of the recipient.
Who are your competitors?
Our competitors fall into two categories. On the local level, it would be Blue Cross & Blue Shield of Rhode Island. On a national basis, we face a multitude of competitors. There are a number of what we call commercial insurers or indemnity insurers – Aetna, Prudential, Cigna, MetropolitanWe find that we don’t typically compete with any Blue Cross plan for national business. Blue Cross plans typically don’t have a national network that can service those types of accounts. Delta is really a hybrid – it has managers over both those kinds of competitors. For example, if you looked at Blue Cross plans, similar to Delta, each local plan has contracts with its dentists that provide protection from balanced billing and give discounts to those employers and employees. But the problem with the Blue Cross system versus the Delta system is that the Blue Cross system doesn’t provide a centralized solution to multi-state employers. The national carriers have a standardized approach to do business nationally. But they typically do not have contracts with dentists that provide those services. So the employer in that situation has a trade-off between standardized, centralized administration – but not the financial savings that go along with it, for their subscribers. With Delta, and this dates back to the early 1990s when the Delta USA product was formedthat product results in about 107,000 dentists nationally participating with Delta Dental plans. That represents more than three out of every four dentists in the country. It provides tremendous access to employers and employees. In Rhode Island, that’s about 93 percent of the dentists. What that means is that an employer who purchases Delta USA products gets access to 107,000 dentists and the administration is centralized in one site. For example, in Rhode Island, Delta Dental of Rhode Island administers benefits on a national basis for Fleet Financial, CVS, Hasbro GTECH
So when you talk about your national business – you’re talking about companies like those you just mentioned that have employees throughout the country?
Yes. What happens is that each of the plans feeds the contractual terms of their local provider network into a national database. Any plan within the Delta system is entitled to use that data and to get access to those contractual terms. For example, if Fleet has an employee in California who goes to see a local dentist there, that dentist participates with Delta Dental of California – but Delta Dental of Rhode Island would pay that dentist directly for those services.
Are you satisfied with the market penetration you have here in Rhode Island?
We’re never satisfied with market penetration. Maybe the best way to describe that is to look over the period since our separation administratively from Blue Cross, in 1993. Our enrollment in 1993 was approximately 180,000 members. We’re now going to surpass a half-million members. We’ve been able to do that for a variety of reasons – by growing both in state and out-of-state. That has allowed us to bring a lot of new jobs to Rhode Island. Since 1998 we’ve grown from 35 employees here to 115.
The health care industry has been devastated by cuts in Medicaid reimbursement. Has the dental industry felt the same cuts or has it been immune to them?
It is impossible to be immune to that. We’re all competing for the same dollars – employee benefit dollars. Why have we prospered while our compatriots on the medical side have had their problems? There are a lot of reasons. We have a lot of similarities, but we also have a lot of differences. The differences start with the fact that we already have tremendous market share on a national basis. We have a different product that give us a competitive advantage in the value that we offer. Our product is also far more predictable, as to the potential for increases in the claims side of the business. That’s because there is typically an annual maximum benefit. We also control the increases in universal (insurance coverage) far more effectively than the medical insurance companies do.
Do you find yourself watching the medical side closely and trying to learn from what they are going through?
There are some parallels. In general, the medical side of the business – particularly the physicians – has probably dealt with some of the managed care issues at an earlier date than the dentists have been required to do. That varies geographically. It is more uniform across the country on the medical side than it is on the dental side. But locally, dentists here have been wrestling with the impact of managed care for a long time. It has been an incredibly competitive environment, which has forced carriers to either become more efficient themselves or to lose money. The difference between ourselves and the medical side of the business in the region is that we not only cut our price – we cut our cost. Whereas with the price war that has been reported to take place in the medical side, prices were cut – but costs weren’t.
People today have fewer cavities. Dentists are turning to more cosmetic work. Have you expanded the kinds of procedures you will cover?
It’s really an evolutionary process. You’re right. Over the past 20 years with the impact of fluoridated water, there has been a reduction in cavities. Dentistry has become a far more preventative benefit than medical has been. At the same time it also has a major restorative component. So two major elements of the benefit include either the prevention of cavities or the restoration of teeth. Dental benefits are also different from medical in that if you look at what is covered under a medical insurance policy, the services covered are almost identical, plan-to-plan. There may be specific exclusions, but that’s not typical. Whereas, with dental, the employer chooses what they cover. It could be basic preventive services or it could be something very comprehensive, which is more common in Rhode Island. Now, the cosmetic aspect of thatyou are correct, dentists are looking for ways to replace the share of their practice that was devoted to restorative care. You see it in orthodonture, in the bleaching and whitening of teeth. You see it in a variety of cosmetic procedures. That’s where the dental side faces the challenge of determining what is cosmetic versus what is functional. It isn’t as big an issue on the medical side, because there is usually a clearer delineation.
So is the whitening of teeth covered by insurance?
No, it’s not. But at the same time, maybe a good analogy is implants. Relatively speaking, implants are still a rather recent advancement in dental coverage. We cover implants as a rider. If an employer chooses to cover them, we will provide coverage at their request. We are certainly willing to do the same for various cosmetic services – but to date, there has not been the employer demand for that. I think we are going to start and see that over time. The other thing about dental that doesn’t really fuel that at this point in time is that dental is almost exclusively an employer-based product.
Are employers using benefit packages as a device for luring new employees?
Prior to coming into this industry, I probably would have answered this question differently. I would have thought that dental would have been a benefit that would have been easily lifted from the package with the rapid rate of inflation with medical. But it has proven very resilient. We find that employers are constantly upgrading benefits and that as we produce ways to save them dollars in plan costs, quite often, they will take those dollars and put them into additional benefits. Our economies of scale are helping employers pay for more benefits, and therefore, retain their employees.
So you are not seeing employers dropping dental coverage as a way to save money?
Very rarely. When a company drops dental, it is often because the company itself is in financial difficulty – not because of the cost of its total benefit package.
