State Puts Bite on Denticare’s Marketing : Insurance: The Irvine-based HMO is accused of illegal marketing and must to stop signing up new patients.
The state Department of Corporations on Thursday accused Denticare of California Inc. of illegally marketing an indemnity insurance program and ordered the dental health-maintenance organization to immediately stop enrolling new patients.
The state’s order prohibits Denticare from signing up new members to both its dental health-maintenance organization and its indemnity insurance plans until the company is in compliance with state law.
George Crawford, senior trial counsel for the department, said Denticare is licensed to offer an HMO dental plan, in which it contracts with dentists to treat member patients for a set monthly fee.
But he said Denticare does not have authorization from the state Department of Insurance to also sell a traditional indemnity insurance plan in which health care providers unaffiliated with its program are reimbursed a percentage of their bills.
A small but rapidly growing HMO, Denticare has about doubled its membership in two years. It gained industry attention last October when it landed a major contract with the state of California, displacing Anaheim-based Safeguard Health Plan, one of the nation’s largest prepaid dental programs.
In mid-1988, Irvine-based Denticare began offering what it called a “dual-choice option,” which it said would give California employers an opportunity to buy both a prepaid dental plan and more traditional fee-for-service insurance from a single vendor. The program was designed to give employees a broader choice of dental insurance coverage.
Department of Corporations officials said they were unsure how many of Denticare’s approximately 200,000 members have chosen indemnity plans.
Denticare officials and the company’s lawyer were unavailable for comment Thursday.
Commissioner of Corporations Christine W. Bender cited her complaints with Denticare in a cease-and-desist order dated July 20. Besides accusing Denticare of illegally marketing indemnity insurance, Bender said the company’s fidelity bond--or its insurance against losses due to employee dishonesty--is deficient by $550,000 for a period that ends Aug. 10.
Crawford said the department is concerned that Denticare’s indemnity plans do not provide the quality assurance and protection from financial risk that are required under the Knox-Keene Health Care Act, which governs HMOs.
“We don’t want Denticare enrollees to have problems in the future thinking that they are covered for dental care and finding that the plan has overextended itself financially,” Crawford said. In other cases, he said, HMOs that have ventured into the indemnity insurance field have miscalculated the less-predictable costs of the program.
Crawford said “the purpose of HMOs is to shift risk from the enrollees to the providers. . . . If you have an indemnity program, ultimately the users are at risk.”
The commissioner called for Denticare to immediately “cease and desist from the solicitation or enrollment of new members” and to stop taking any payments from or on behalf of members of its Alliance 1000, Dual Choice and any other indemnity plans.
The company has been ordered to stop the operation of its indemnity plans within 40 days “in an orderly manner which will not jeopardize the subscribers or enrollees’ continuity of care.” The company was also required to notify within the next 10 days all subscribers to its indemnity plans that the plans will be discontinued.
Crawford said Denticare will be allowed to resume normal marketing and enrollment activities after it satisfies the commission that it is in compliance with the law.
