What Is a Direct Reimbursement Dental Plan?

Where Direct Reimbursement Came From

Direct reimbursement isn't a new idea. Dental benefit consultants and the American Dental Association have described versions of it for decades, largely as an alternative to network-based dental HMO and PPO plans for employers frustrated by network restrictions and rising premiums. What has changed is the administration: older DR plans ran on paper claim forms and manual reimbursement checks, which limited how quickly employees got paid back and made the plan harder for employers to administer at scale. Card-based platforms are what make DR practical for a modern employer: the reimbursement mechanic is the same one that has existed for years, but claim validation and payout now happen automatically instead of by mail.

How Direct Reimbursement Works

A direct reimbursement plan has four moving parts:

1. 1

   The employer sets a reimbursement schedule. Instead of choosing a carrier and a network, the employer defines how much of each dollar spent on dental care gets reimbursed, for example 100% of the first $100, 80% of the next $200, and 50% up to an annual maximum.

2. 2

   The employee sees any dentist. There is no provider network to stay inside of. The employee books care with whichever dentist they already see, or any dentist they choose.

3. 3

   The claim is validated and reimbursed. On platforms like ClariFi, this happens through a virtual payment card tied to real-time claim validation, so the employee is not waiting on a manual reimbursement check. On older, paper-based DR plans, the employee submits a receipt and is reimbursed afterward.

4. 4

   The employer pays only for care that was actually used. There is no fixed monthly premium paid to a carrier regardless of utilization. The employer's dental spend moves with how much care employees actually receive.

Direct Reimbursement vs. Traditional Dental Insurance

The core difference is who bears the cost of unused coverage. With traditional insurance, the employer pays a fixed premium whether or not employees use their benefits, and that premium has to fund the carrier's network contracts and administrative overhead. With direct reimbursement, the employer only pays out claims that were actually incurred.

That last row is the honest trade-off: direct reimbursement removes the network and the fixed premium, but it also means the employer, not an insurance carrier, absorbs the swings in how much care employees use in a given year.

Plan Design Options

Because the employer sets the reimbursement schedule directly, DR plans are typically built around one of two structures:

• Tiered reimbursement. A declining-percentage schedule, for example 100% of the first $100 spent, 80% of the next $200, and 50% up to the annual maximum. This gives employees the most flexibility in how they use their benefit.

• Service-based reimbursement. Reimbursement varies by category of care instead of dollars spent, for example 100% for preventative services, 80% for basic services, and 50% for major services. This mirrors how traditional insurance structures coverage, while still keeping the network-free, pay-for-what's-used mechanics of direct reimbursement.

See ClariFi's plan design examples for a worked breakdown of both structures.

What Direct Reimbursement Costs

A DR plan has two cost components, and it's worth keeping them separate:

• The administrative platform fee. On ClariFi, this is $5 per employee per month, covering claim validation, payroll reconciliation, plan documents and reporting.

• The actual claims paid out. This is billed separately and scales with how much dental care employees actually use, up to the employer's chosen annual maximum.

Traditional dental insurance bundles both of these into a single premium, and a meaningful share of that premium funds the carrier's administrative and network overhead rather than paying claims directly.¹ Separating the two is what makes a DR plan's true cost visible.

1. ClariFi internal modeling, 2026, based on typical fully-insured dental plan administrative loads versus ClariFi's platform fee as a share of total plan cost. Figures vary by group size and plan design.

Want the math for your own group? Use the dental benefits cost calculator to compare your current premium to ClariFi's platform fee.

Is Direct Reimbursement Right for Your Company?

Direct reimbursement tends to fit employers who want predictable administrative costs, don't want to manage network negotiations, and are comfortable with dental spend moving with actual usage rather than a flat premium. It works for employers of a wide range of sizes, including small and mid-sized companies: the mechanics don't require a large group to function. The trade-off worth weighing going in: because there is no carrier absorbing utilization risk, a year with unusually high dental usage across the group costs the employer more than it would under a fixed-premium plan. For a closer look at that trade-off, and at the “only for large employers” objection you may have heard, see direct reimbursement vs. dental insurance.

Frequently Asked Questions