State Switches to Irvine-Based Dental Plan

Complaining of poor service, the state government has broken off a seven-year relationship with Anaheim-based Safeguard Health Plan, one of the nation’s largest prepaid dental plans, and signed instead with the small but growing National Health Care Systems Inc., more widely known as Denticare, in Irvine.

Patricia McDonald, chief of the benefits division of the state Department of Personnel Administration in Sacramento, said the state did not renew its contract with Safeguard because many of the 18,000 state employees enrolled in that plan complained they had trouble finding dentists affiliated with Safeguard.

Ronald I. Brendzel, senior vice president of Safeguard, whose membership has declined from a peak of more than 1 million in 1987 to 814,000 in June, contends that the company lost the state contract mainly because it requested a higher premium. He said the company’s contract with the state had been only “marginally profitable.”

Cites Turnover Rate

Brendzel said the company has been experiencing a greater turnover of dentists than it would prefer because dentists do not consider Safeguard’s reimbursement rate to be adequate. He added that Safeguard’s turnover rate is comparable to that of other prepaid dental plans.

Safeguard earned $3.4 million on revenue of $67.8 million last year.

Officials at National Health Care Systems were enthusiastic about winning the state contract, predicting that it would add at least $2 million to the company’s annual revenue. In 1988, the company earned $57,000 on $5.1 million in revenue. In the first six months of this year it earned $180,000 on revenue of $4.3 million.

National Health Care Systems’ officials said the company has adopted a strategy to both go after larger employers and to increase its profit margins.

Its Denticare plan has about 193,000 members statewide, up from 100,000 members in 1988, and a dental panel of 1,198 general practitioners and 397 specialists, company marketing director Valerie Clark said.

Lucrative Contract

Robert Mathuny, National Health Care’s chief financial officer, said the state contract is lucrative one. “We expect conservatively a 6% to 10% profit margin.”

Denticare will be one of three prepaid dental health plans offered to the state’s 150,000 employees.