The effects of insurance carrier market power on dentists and patients

Market power among dental insurance carriers is a carrier's ability to reimburse dentists at rates below what would exist in more competitive areas. Competition among carriers for dentists' participation in their networks protects dentists from highly discounted fees. The authors examined the extent to which dental insurance carriers facing less competition increase fee discounts.

The authors selected a sample of dentists from listings of general practitioners. They identified 219 metropolitan areas and contacted 11,542 dentists in those areas by mail, telephone or both. A total of 8,017 dentists completed surveys (a response rate of 69.46 percent). The authors' key focus was the possible relationship between carrier market power and the size of the fee discount. The authors compared discounts across metropolitan areas with their differing levels of insurance coverage and carrier market shares.

Carrier market power was directly related to the sizes of fee discounts. The larger discounts were found where there was significant dental insurance coverage and few carriers providing this coverage. Dentists' net incomes were significantly less in areas with larger fee discounts.

Dental insurance carrier market power leads to increased fee discounts. These higher discounts reduce dentists' earnings. Although the larger discounts may result in lower overall patient costs, this patient benefit is temporary. Ultimately, the number of practicing dentists in these communities will decrease as dentists seek improved practicing conditions elsewhere. This reduction will lead to overall fee increases until the earning potential of dentists is restored.