Nothing But the Teeth

There was just one last piece that Mike Walsh wanted to put in place.

A little over a decade ago, Walsh, then the CEO of Eagan-based insurer Delta Dental of Minnesota, saw the future of dental insurance. It required the nonprofit firm to “make ourselves a little more sophisticated than just claims crunchers,” he recalls.

In order to keep as many accounts as possible, Delta Dental had to keep its premiums low and its service high: Small and midsize employers in particular often drop dental coverage in a downturn.

So Walsh and his team created something completely new: A for-profit entity that could provide dental benefits to companies beyond Minnesota, which Delta Dental, as a health care insurer, was not allowed by Minnesota law to pursue. The new entity, DeCare Dental, built an extensive infotech operation by creating a subsidiary of high-skilled, lower-cost developers in Ireland, Walsh’s native country.

To allow DeCare to expand beyond Minnesota and build upon its massive infotech infrastructure, Delta Dental officially spun off DeCare Dental in 2005; DeCare now supports Delta Dental’s information systems and other back-office operations. Delta Dental remains a nonprofit insurer, though with far fewer employees, focusing on sales and customer care. Walsh moved over to become DeCare’s CEO, overseeing several acquisitions, including a dental insurer in Maine.

Still, Walsh saw that one more thing was needed: a partnership or merger with a major medical insurer that could bring even more dental customers.

DeCare talked with Minnetonka-based UnitedHealthcare, but decided not to take that direction. “Frankly, their intent, if they got us, would have made us disappear,” Walsh says. “The DeCare company would have disappeared. Everything—bones, everything—would be fed into the grinder.”

WellPoint was different. The product of a 2004 merger from two Blue Cross plans, Indianapolis-based WellPoint (NYSE: WLP) has 35 million medical members. At the time it began talking with DeCare, WellPoint also covered 5 million dental members—a number it wanted to grow.

DeCare, Walsh adds, “had strengths that [Wellpoint] didn’t have on the dental side. We had systems, we had the people, we had the expertise, we had the development on that side. [WellPoint] had dental, but they really didn’t have the same degree of sophistication.” To get it, WellPoint was willing to give DeCare a certain amount of autonomy. Their merger deal closed in April this year.