Delta Dental Is the Model
To: The Honorable Kathleen Sebelius
Secretary, Department of Health and Human Services
Until the inevitable appointment of a health “czar,” you are the person most responsible for giving direction to health care reform. Past efforts at reform have urged us to examine health care plans in Canada, Germany, and England. There is a better model for health care reform right here in the United States. For a hint at its source, just look in the mirror and open your mouth. That’s right, you should think of Delta Dental of Minnesota (with a slight Irish twist–more about that later).
In 1987, our state’s redoubtable commissioner of commerce, one Michael Hatch, was within four months of closing Delta Dental of Minnesota, basically for insolvency. Delta—essentially lacking any financial reserves—had gross revenue of approximately $57 million, and it accomplished this dismal performance at an administrative cost of 16 percent.
Does any of this sound eerily familiar—like our current health care delivery system?
Over a period of 22 years, Delta Dental of Minnesota reformed itself. Today, it has reserves in excess of $160 million, revenue of about $1 billion, and an operating expense ratio of less than 7 percent. During that time period, Delta—a nonprofit health service plan in accordance with Minnesota law—launched a for-profit business, DeCare Dental, that enabled it to expand into other states. Eventually, DeCare, as the administrator for Delta Dental of Minnesota and nine other dental brands, built a related software business in Ireland and grew to be the dental benefits manager for more than 22,000 employer groups worldwide. Delta Dental of Minnesota increased its employment in the state by more than 400 percent and built a major operations and call center on the Iron Range.
Finally, DeCare Dental was sold by its (and Delta of Minnesota’s) parent company, DeCare International, to Wellpoint, a Fortune 50 health insurance provider based in New York. The proceeds of that sale, which closed in May of this year, resulted in a trust fund to support delivery of dental and oral health care to children in Minnesota (a trust amount of about $100 million).
None of the proceeds of the DeCare sale accrued to the benefit of any Delta or DeCare manager. DeCare International, a nonprofit, does not have stockholders, does not grant options, and is not liable to give out the excessive executive compensation that we have sometimes seen at other health companies. Doesn’t this sound like the kind of reform we would all like to see in our current health delivery system?