Direct Reimbursement (DR) Frequently Asked Questions (FAQ)
If I design a plan for 250 individuals with an annual maximum of $1,000, will I spend the full $250,000?
It's highly unlikely. Experience tell us that plans do not reach their maximums for several reasons:
- Almost 35% of people with dental benefits do not receive dental treatment in a given year
- Of those who do receive treatment, most incur dental costs just less than $300 annually
- Stop-loss insurance is often available to cover the risk of excessive claims
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Is DR easy to administer?
Yes. DR can be easily administered either in-house or by your third-party administrator (TPA). There are no claim forms, service limits, or exclusions required to complicate the process. All you have to do is the following:
- Verify patient eligibility
- Calculate benefit reimbursement according to your plan design
- Issue the reimbursement check
- Keep records of amounts paid to each employee
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DR is for groups
not individuals.
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Simple filings such as IRS disclosure reports required by the government can be prepared by qualified in-house staff, TPAs, consultants and brokers.
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Does DR work for companies of any size?
Yes. Whether your company is big or small, DR can be customized to suit your needs and financial constraints. In fact, there's almost no practical limit on the size of a company that can benefit from DR. See Advantages for Any Size Company for additional information.
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How Do Flexible Spending Accounts (FSAs) Work with Direct Reimbursement?
FSAs work the same way with DR as they do with any other dental benefit plan. The usual tax benefits of FSAs would be available (along with the benefits of DR):
- When employees are reimbursed according to the plan design, their out-of-pocket dental expenses can be paid from the FSA. That means they are paying these expenses with pre-tax dollars.
- Since the funds in an FSA do not qualify as income, employers are not responsible for paying wage-sensitive taxes (i.e., FICA and FUTA) on the amounts set aside.
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