Oregon Dental Service Health Plan, Inc. - Company Profile, Information, Business Description, History, Background Information on Oregon Dental Service Health Plan, Inc.

601 Southwest Second Avenue
Portland, Oregon 97204

Company Perspectives:

ODS Health Plans will be the premier carrier in the fields of dental and medical health insurance by focusing on its customers, the brokers who facilitate our ability to win business, the employers who buy our products, the insureds who use our products and services, and the health care professionals who provide these services. We will provide the highest value products supported by the best possible service. We will keep our promises, and meet all of the reasonable expectations of our customers.

History of Oregon Dental Service Health Plan, Inc.

With offices in Portland, Milwaukie, and La Grande, Oregon, Oregon Dental Service Health Plan, Inc. (ODS Health Plan) is one of the few remaining insurance carriers based in and focused on providing service in Oregon. Founded in 1955 as Oregon Dental Service, ODS Health Plan works with more than 6,000 Oregon physicians and specialists and more than 1,800 dentists to provide a full range of medical and dental plans to more than 650,000 members. ODS Health Plan, Inc., a subsidiary of Oregon Dental Service, founded in 1985, provides traditional indemnity plans, managed care plans, preferred provider organization plans, and point of service plans. The company has three other subsidiaries--BestChoice Administrators, Inc., which provides third-party administrator coverage for self-insured businesses; Dental Benefits Insurance Company, a property and casualty insurance company serving the needs of dentists; and Dentists Management Corporation, which pioneered the development, marketing, and support of integrated dental practice management software and hardware.

A Statewide Nonprofit Branching Out: Mid-1950s Through 1989

The Oregon Dental Association, a dentists' trade association, founded Oregon Dental Service (ODS) in 1955 in response to a direct request by the Longshoreman's Union to provide dental care to union members' children. ODS, a nonprofit provider of group dental plans, one of the first dental insurers in the nation, from the start had a board of directors, half of whom were non-dentists appointed by the Oregon Dental Association. ODS prided itself on distinguishing its plan from other plans in two ways: Claims came directly to ODS from the dentist, whom ODS reimbursed, and the customer received a bill from ODS for any amount he or she owed after the deductible. The insurer began to grow significantly in 1972 when some schools in Portland picked up the plan and, in 1976, when state employees joined, giving the insurance company statewide standing. In 1974, Bud Lindstrand assumed the role of CEO of the company, a post he retained until 1998.

By the mid-1980s, ODS felt that it had exhausted the possibility of much new client growth in Oregon and turned its attention to expanding its services, diversifying into fee-for-service medical coverage in 1985 with the founding of Oregon Dental Service Health Plan, Inc. The company also launched three other subsidiaries. When Oregon dentists began to experience difficulty purchasing malpractice insurance, ODS founded a wholly owned for-profit subsidiary of Oregon Dental Service, which provided all classes of dental property, casualty, and liability insurance in 1985. Dental Benefits Insurance Company also began offering workers' compensation policies in 1990 when dentists and their employees began having difficulty getting workers' compensation policies written. BestChoice Administrators, Inc. started to provide third-party administrator coverage for self-insured businesses. Dentists Management Corporation, a for-profit company owned by Oregon Dental Association, pioneered the development, marketing, and support of integrated dental practice management software and hardware that tied into a mainframe at ODS.

ODS also faced significant challenges in response to changes in Oregon's health insurance market beginning in the second half of the 1980s. Competition between insurance companies turned fierce; at each bid for a new contract, ODS vied with 10 to 15 other companies, such as Blue Cross/Blue Shield, United Benefit, Aetna, and others. In addition, expensive medical technology, rising labor costs, an aging population, and a growing number of uninsured patients led insurance companies to introduce double-digit premium hikes to compensate for the increased costs of doing business. As a result, employers began turning to managed healthcare plans, or health maintenance organizations, otherwise known as HMOs, to provide health and dental coverage for their employees.

The Second Largest Indemnity Plan in the State: Early 1990s

By the early 1990s, ODS contracted with close to 2,000, or 95 percent, of dentists in the state of Oregon. The second largest indemnity plan in the state--still one-eighth the size of Blue Cross/Blue Shield--it had 592,614 enrollees in its dental plan and 94,640 enrollees in its medical plan. ODS's dental business made up about 55 percent of its earned premiums and accounted for about 20 percent of all dental business in the state.

But trouble arose in 1991 when dentists, who were also members of a preferred provider organization (PPO) run by Dental Registry Inc. of Portland, resigned from that PPO after ODS reminded them of its policy that dentists who were part of ODS were not allowed to charge fees to other groups lower than those charged to ODS members. Although such a contract clause--called "most favored nation"--was common among insurers, sources at the time insisted that the impact of ODS's "Rule 3" was to thwart the formation of managed care dental products for dentists. The Willamette Dental Group, in association with Dental Registry Inc., filed an unsuccessful lawsuit against ODS, claiming that ODS had interfered with their ability to offer discounted fees to competing insurance plans. Although Willamette Dental lost its suit, it took its case to the Oregon Court of Appeals, and in 1994 the U.S. Department of Justice began investigating potential antitrust violations by ODS.

The year 1991 also saw the passage of new state law in Oregon, which required that all insurers offer a basic benefits package to small businesses--those with from 3 to 25 employees--at lower rates than traditional packages, that is, with limitations on premiums and exclusions. ODS began to offer small group health insurance in 1992, positioning itself well to capitalize on the mandate, which became mandatory for all small businesses in 1998.

Developments After the Institution of the Oregon Health Plan: Late 1990s

Another new law, adopted by the legislature in 1994, created the Oregon Health Plan, which spearheaded a shift within healthcare to HMO-style coverage in Oregon and expanded the Medicaid market. In response to these changes, in 1993 ODS entered the managed care business, teaming up with Oregon Health Sciences University to launch head-to-head competition with Blue Cross/Blue Shield of Oregon. ODS and OHSU linked up with an estimated 2,500 physicians in all but two Oregon counties and forged a relationship with most of the hospitals outside the Portland metropolitan area. One of 22 applicants seeking contracts with the state, the joint venture initially went after the newly growing Medicaid business. It gave ODS an entrée with rural physicians who sought more Medicaid and private business.

The combined ODS businesses had 500,000 policyholders and revenues of $185.5 million in 1994, $101.5 million of which came from the company's dental plans. Although dropped by the state's Bargaining Units Benefits Board for 1994, the new HMO, ODS Health Plan, was added to the list of plans offered by the State Employees Benefits Board, giving it a shot at some of the $80 million worth of insurance purchased by the state in 1994.

At about this time, many on ODS's board began to lobby to get the Oregon Dental Association out of those businesses that it had developed, which they considered tangential to its mission. In 1995, top managers at ODS, led by Lindstrand, the company's CEO, offered to buy the ODS Health Plan, Inc. and the Association's three for-profit subsidiaries from the Oregon Dental Association. The offer, however, which was originally well received, created divisions among board membership of the $240 million company. It was rejected by board vote.

The following year, the company had outgrown its headquarters, and ODS began construction on a new $65 million building, the ODS tower, in downtown Portland. As the majority owner and occupant of the tower, which was completed in 1999, ODS leased 40 percent of the office space. Also in 1999, ODS opened a satellite office in LaGrande, Oregon when it could not find enough skilled workers to process its claims in Portland. More building was completed in 2001 when ODS opened the ODS Plaza in the converted Pendleton Woolen Mills shirt factory in Milwaukie, Oregon. This building housed offices for ODS Health Plan's claims, printing, and mailing divisions and for the company's BestChoice Administrators, Inc. and Dentists Management Corporation

Under the leadership of Robert Gootee, a longtime board member, who assumed the positions of president and chief executive of the company in 1998, ODS now faced the shortcomings of the Oregon Health Plan. According to a Wall Street Journal article published in 1999, many HMOs began to pull out of the plan shortly after it was inaugurated, finding that they could not make it work without a "sophisticated provider network and a critical mass of patients." In 1997, ODS Health Plans offered the state plan in 15 counties; by 1999, it offered it in only six, five of those in the more densely populated Willamette Valley in which Portland is located.

With solid dental membership of more than 600,000, health plan membership of about 200,000 in 2001, and total revenues of approximately $573 million, management under Gootee fixed its attention on expanding ODS's subsidiary businesses. Several of the company's subsidiaries experienced significant advances in 2001: BestChoice Administrators added 60 new accounts, including the Portland metro area's transportation provider, Tri-Met, and Rite Aid Corporation; it added these to a wide range of public and private sector clients. The sales arm of Dental Benefits Insurance Company, the leading malpractice dental insurer in Oregon, received certificates necessary to expand operations in Montana, Utah, and Arizona. Dentists Management Corporation added an online version of its software services.

Principal Subsidiaries: Health Services Group: ODS Health Plan, Inc.; BestChoice Administrators, Inc.; Dental Benefits Insurance Company; Dentists Benefits Corporation; Dentists Management Corporation.

Principal Competitors: Blue Cross/Blue Shield of Oregon; Foundation Health Plan; Greater Oregon Health Service Inc.; Kaiser Permanente; Pacific Health & Life Insurance Co.; PACC Health Plans Inc.; Pacificare of Oregon; Health Maintenance of Oregon Inc.; Qual-Med Oregon Health Plan; Sisters of Providence.


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