Illinois dentists borrow to keep treating state employees amid budget crisis

By Harvard Zhang

When Dr. Joshua Renken opened his Springfield clinic in 2003 after getting his Doctor of Dental Surgery degree, he didn’t foresee waiting for months to be paid $500,000 owed him by the state of Illinois for seeing its employees, suffering from a cash crunch, and borrowing from a commercial bank against his business assets, all while owing more than $100,000 in student debt.

The 10-month state budget impasse turns out to be a double whammy for thousands of Illinois dentists. They treat state employees at a discount without being paid, including the very politicians failing to pass a budget to pay their dentists. Furthermore, were dentists to renege on the contracts regarding state employees, retirees and dependents, they would risk losing a large swath of other patients in insurance plans offered by the same company.

Swamped with swelling unpaid medical claims and interest penalties despite shrinking funds to provide health care for its employees, the state of Illinois owes 9,000 dentists $150 million, or $16,667 per doctor on average, according to Dave Marsh, government relations director of the Illinois State Dental Society.

Not compensated by insurance companies but the state of Illinois directly for seeing civil servants, dentists and other medical providers have limped along without state payment for months or even over a year because the state lacks a spending plan. So cash-strapped dentists have been taking out loans, selling their medical receivables at a discount, and now assessing an option for obtaining immediate full payment of their unpaid claims in return for relinquishing the interest the state owes them.

“Dentists are not trained to operate a lending entity,” said Dr. Renken, who last received state money eight months ago. “It’s a very tough position to be in because there’s so much uncertainty. But we don’t change the way we treat our patients in any way.”

“No way to know how many” dentists have taken out loans to cover operating expenses, Marsh said. “Most people keep it private.”

Self-insured vs. fully-insured

The Illinois State Employees Insurance Program covering 356,600 participants offers two categories of insurance plans: the self-insured and the fully-insured.

For the state’s four self-insured plans applying to state employees, the state of Illinois assumes the financial risk of paying medical claims with state funds, which has been frozen because of the current budget-less status. For more than 10 other traditional fully-insured plans, the state outsources the health care responsibility to insurance carriers by paying capitation fees.

Self-insured plans include dental care administered by Delta Dental Plans Association, Quality Care Health Plan by Cigna Corp., and Open Access Plan by Coventry Health Care Inc. and HealthLink Inc.

According to the state’s Commission on Government Forecasting and Accountability, the state owes health care professionals $2.89 billion in unpaid bills for treating public servants, nearly half of which apply to self-insured plans.

Participating self-insured medical professionals haven’t seen state money for eight months to over a year, nor are they qualified for financial relief programs available to vendors in fully-insured plans — a key point that guarantees medical providers in fully-insured plans timely payments from insurers that themselves are waiting for premiums from the state.

“My personal concern is we run the risk of medical providers saying ‘I cannot handle this any more,’ and they drop out of government programs including Medicare and Medicaid in toto and only work on the private side,” Frank D’Antonio, president of Coventry Health Care’s Missouri and Southern Illinois operations, testified during an April 13 state Senate committee hearing.

Between A rock and a hard place

More than 50 percent of Dr. Renken’s patients — state and commercial — use Delta Dental plans. On top of treating state employees at a discount up to 30 percent in exchange for the large patient base, his contract with Delta Dental deters him from cutting off state patients, because he’ll have to forgo commercial patients using Delta Dental as well.

“The government is doing nothing,” Marsh said. Dentists in Illinois “need them to solve the budget crisis and pay their bills.”

Illinois dentists, as notified by Delta Dental a month ago, are now assessing a financial assistance program offered by Healthcare Finance LLC that would pay 100 cents on the dollar of their delinquent medical claims in exchange for unpaid interest. The terms for this month-old plan are similar to the financing options accessible to vendors in fully-insured plans since 2012. It was intended as an alternative to selling receivables to factors at a discount.

State law stipulates that health care professionals contracted in self-insured plans are entitled to interest compensation of 0.75 percent per month after not being paid for 30 days.

Healthcare Finance co-founder Brian Hynes said his company was in touch with 300 dentists and was looking at this week for the first disbursement.

To be sure, medical professionals in self-insured plans taking out loans from commercial banks may be compensated by an interest margin when the state eventually pays them back. Because Dr. Renken used his hard clinic assets for his credit evaluation, the line of credit he opened has a lower interest rate than the annual 9 percent the state of Illinois owes him on the unpaid bills. The line of credit with a commercial bank enables him to draw on the credit when he needs to.

Nevertheless, Dr. Renken said “most dentists are not interested in chasing insurance claims over months and years in pursuit of the ability to buy and sell money to make marginal gains by the difference in interest rates. Most dentists and their teams want to focus on caring for their patients. Timely reimbursement as we care for our patients is our ultimate goal.”

Dr. Renken warned against the escalating costs of patients delaying preventive care stemming from a sense of mistrust in their dentists not being paid for treating them for months.

“Patients are leery of their benefits being diminished, leery of going to the dentist who’s finally given up on providing and just want cash payment upfront,” Dr. Renken said. “Dental disease is very much a chronic disease, the longer people wait to be cared for, the higher the cost becomes to the greater community.”

Ballooning state liabilities

The state would see its state employee insurance liabilities exceed its funding by $76 million at the end of this year, and the gap would widen to $559 million next year, according to the Commission on Government Forecasting and Accountability report. A swelling backlog of unpaid bills, worsening interest penalties, and shriveling state funds contribute to the quagmire.

“It is uncertain what sources of funding or changes in plan design will be used to cover the additional unfunded liabilities,” the March report said.

According to the report, interest penalties, which has been piling up from zero over the past decade, would reach $221 million by June 30, and expand to $233 million next year. The cost to provide healthcare for each state-related participant is projected to reach $8,156 in fiscal 2017, a 50 percent bump from $5,456 in 2008. Medical cost inflation and longevity contribute to the ever-rising liability per person.

“We’re very concerned about the cost curve,” Illinois’ Department of Central Management Services Acting Director Michael Huffman testified during the recent state Senate committee hearing. “We’re now in a stop-the-bleeding mindset.”

Huffman, who supervises state employees’ benefits, added that no vendor had logged an ultimatum to demand payments or stop seeing patients.

Photo at top: The state of Illinois owes 9,000 dentists $150 million for treating state employees. (Steve Snodgrass/Flickr)