Is your dental membership plan legal? Five checks before the first member joins

By Profit Smiles · Published October 5, 2026

An in-house membership plan looks like the simplest arrangement in dentistry. A patient pays your practice an annual fee, an exam and X-rays are included for the year, and a member discount applies to other treatment. No insurer, no claim forms, no network.

The law sees more than that. A fee paid in advance for care is something insurance regulators have views on. A discount for some patients is something your PPO contracts may have views on. The plan also runs on patient records and card payments, it may renew automatically, and it will be advertised — and each of those comes with rules that do not announce themselves.

None of it is a reason not to offer a plan. It is a reason to make five checks before the first member joins — or now, if your plan is already running — and to know what to ask the attorney who gives you your state's answer. This guide is general information, not legal advice: the rules vary by state, and they change.

• Check one: what your state calls the plan
• Check two: the terms, in writing
• Check three: your PPO contracts
• Check four: patient data and renewals
• Check five: how you describe it, and to whom
• Questions to bring your attorney
• How one practice did it
• Run your own numbers
• Sources

Check one: what your state calls the plan#

The clearest way to see why this check comes first is an old legal opinion. In 2005, New York's insurance department weighed a dentist's proposal very like the one above: patients would pay an annual fee to join a club whose members got discounts on dental work at the practice. The department's lawyers answered that the arrangement "would constitute the doing of an insurance business", needing an insurance license, unless what a member paid for each service that depends on chance — a filling or crown the patient may or may not need — still covered the cost of delivering it, including reasonable overhead. A routine annual exam with X-rays was not the problem, because it is "not the result of a fortuitous event."

That is the logic regulators work with, and each state draws the line in its own place. States fall into three overlapping groups.

States with a law that says yes, on conditions. Some states have written laws saying an agreement like this is not insurance, as long as it meets the law's conditions. Illinois's In-Office Membership Care Act and Louisiana's law on direct primary care agreements with a dental practice, both from 2019, were written for dentistry. Arizona, Florida and Iowa have broader direct-care laws that reach dentists, and Texas widened its own in 2025 from physicians to other licensed health care practitioners. The conditions are where the work is: commonly a written notice that the agreement is not insurance, sometimes in prescribed words; a limit of twelve months' fees paid in advance; a refund of unearned fees when a member leaves; no billing an insurer for the services the agreement covers; and, in Illinois, no selling the agreement to an employer or group.

States that regulate discount plans or prepaid care. A number of states license discount medical plan organizations. The model law for them, written by the National Association of Insurance Commissioners, exempts a provider who gives its own patients discounts "without any cost or fee of any kind to the patient" — and a membership has a fee. Washington's insurance commissioner tells providers plainly: "If you accept prepayment for health care services, you likely fit the legal definition of a health care services contractor," and those "must be licensed."

States that have said nothing specific. Silence is not permission. The general insurance and discount-plan rules still apply.

So find out which groups your state is in. Describe the plan exactly as you will run it — the fee, what is included, the discount, the term, renewal and refunds — and ask your state's insurance department and dental board whether it needs registration, a license or particular wording. Your state dental association may already know the answer.

Check two: the terms, in writing#

Every member should get the plan's terms in writing before paying, and keep a copy. The terms are where a plan shows what it is, so they need to cover:

• that the plan is not insurance — in your state's words, if it prescribes them;
• the fee, the term, and exactly what is included;
• the member discount and what it applies to;
• whether the plan renews automatically, and how to switch that off;
• how a member cancels, and what is refunded;
• that the agreement is with your practice and works only there.

A template saves drafting time, but the state-specific parts are exactly where a generic one goes wrong. Florida's direct-care law, for one, sets out the statement the agreement must carry on its signature page — in contrasting color and at least 12-point type.

Cancellation deserves particular care. Where a direct-care law applies, the member's right to leave is often written into the statute: in Illinois the patient can end the agreement at will by written notice, and in Iowa a patient may end it at any time and receive unearned charges back within thirty days. Weaker terms can cost the plan the law's protection. That matters most if you collect the fee in monthly payments and your terms say the membership cannot be canceled part-way through its term. Dr. Prachi Deore, in the protocol's own training on monthly payments, calls it "a caution worth taking seriously: some states regulate how membership plans can be canceled."

Check three: your PPO contracts#

A member price is a fee you charge some patients — and some PPO contracts care about the fees you charge anyone.

The clause to find is the most-favored-nation clause, which promises the network the lowest rate you charge for a procedure. The American Dental Association spells out what that means for a membership plan: "if your in-office plan fee for a procedure is less than the fee you have committed to with the payer, the payer is permitted to reimburse you at the lower fee." The price offered to a few members becomes the fee for every patient on that network.

The same effect can hide in a definition. Contracts, and the provider handbooks they incorporate, can define your usual fee by what patients without that coverage pay — and some net out discounts. One network's published definition is the fee a dentist most frequently accepts from non-insured patients, "less any discount that is regularly offered to patients." A member discount may well be one.

Some states ban most-favored-nation clauses in provider contracts. Michigan's ban reaches nonprofit dental care corporations and is worded broadly. Connecticut's and Ohio's include dentists among the providers they cover, but they turn on the rates you give other payers, so they may miss a usual-fee definition. Whether any ban protects your member prices is a question for your attorney, not an assumption.

What to do: pull every PPO contract, its fee schedule and the handbook it refers to. Search them for "most favored," "lowest," "usual," "customary," "regularly charged" and "discount," and mark every hit for your attorney. Then compare, code by code, member prices with each network's contract fee. If you price as the membership guide suggests — a member discount well below your PPO write-offs — members pay above those fees on most codes, so a lowest-fee clause gains nothing there, though your reported usual fee may change. The codes where a member pays less are the ones to raise first. And be clear about who the plan is for: the ADA's sample terms say plan membership "cannot be combined with current dental insurance plans."

Check four: patient data and renewals#

Patient data. If your practice sends claims or other HIPAA transactions to insurers electronically, it is a covered entity under HIPAA, and its membership records — who joined, what they paid, what they had done — are patient information like any other. A vendor may create, receive, maintain or transmit that information for you only under a written business associate agreement. That includes cloud software the plan runs on: HHS says a cloud vendor that stores the data is a business associate "even if the entity cannot actually view" it. Ask every vendor that touches member records for its agreement.

Renewals. A plan that renews automatically is a subscription in the eyes of consumer law. When members sign up online with automatic renewal, the federal Restore Online Shoppers' Confidence Act requires you to disclose all material terms clearly before taking card details, get express informed consent before charging, and provide a simple way to stop the recurring charges. Several states add laws of their own. California's, for one, requires a renewal notice 15 to 45 days before a plan of a year or more renews, and an annual reminder for contracts made, amended or extended since July 2025. So check what your software sends, and when, against your state's rule. Make renewal something a member switches on rather than something they have to find a way to switch off, and keep a record of each member's consent.

Check five: how you describe it, and to whom#

The words. Never call the plan insurance, coverage or a benefit plan — at the desk, on the notices, on the website. Avoid "insurance alternative" too; it invites exactly the comparison the plan must not make. It is a membership with your practice.

Discounts and "free". Dental boards regulate how discounts are advertised. Virginia's permits a discount or free offer in an advertisement only when it discloses the nondiscounted and final discounted fees and the time period, and the dentist keeps evidence to back them up. Texas's requires an advertised discount to state the standard fee and whether the discount is limited to cash payment, and forbids calling a service free when a third-party payor, including Medicaid or Medicare, pays for it. Florida requires a specific capitalized statement on ads for free or discounted services. Check your board's rule before the plan goes on your website, and prefer "included" to "free": the exam and X-rays are part of what the fee buys.

Referral rewards and government coverage. A reward for bringing in a new member is a payment for a referral, and states differ on what a practice may give; the referrals guide covers the rules. Where patients with Medicare, Medicaid, CHIP or other federal coverage are involved, federal law joins in: the anti-kickback statute and the civil penalty for inducements to beneficiaries. One advisory opinion shows how: in 2017 the HHS Office of Inspector General said a pharmacy's paid membership open to such patients "would implicate both" laws, then declined to impose sanctions on that program's particular facts. Decide with your attorney whether your plan is open to patients with government coverage, and on what terms, before anyone with that coverage enrolls.

Questions to bring your attorney#

The ADA's own guide calls consulting your attorney "an important initial step." Bring the plan exactly as you will run it, and these questions:

1. Does our state treat the plan as insurance, a discount plan, a direct-care agreement or none of these — and does it need registration, a license or set wording?
2. What must our terms say about cancellation, refunds and payment in advance?
3. Do any of our PPO contracts have a most-favored-nation or usual-fee clause our member prices could trigger, and what fee should we report?
4. Can the plan be offered to patients with Medicare, Medicaid, CHIP or other federal coverage, and on what terms?
5. Do our renewal consent, notices and cancellation meet the rules that apply to us?
6. Do our advertisements for the plan meet the dental board's rules on discounts and "free"?

If your plan is already running, ask the same questions now, and fix the terms first: every new member and every renewal then starts on the right footing.

How one practice did it#

Dr. Prachi Deore runs Coppell Smiles, a solo practice in Coppell, Texas, and hers was the first practice on Profit Smiles — the tools were proven there before they were offered to anyone else.

Her plan has the simplest possible shape: one annual fee, paid once; an exam and an X-ray included; a member discount on treatment. No tiers, no fine print a patient would need a lawyer for. Simple is also easier to put in writing, and easier for an attorney to check. In the first ninety days of offering it, 48 of her patients joined.

Her results are one practice's results, measured in the platform, and individual results vary.

Run your own numbers#

The free membership plan calculator on this site estimates what a plan could be worth from a handful of inputs: the adults in the area you draw from, the share without dental insurance, a realistic share you could reach, and the value of a patient after the member discount. It opens with an example practice's figures; replace them with yours, and nothing you enter leaves your browser. Run it before the attorney's hour: knowing what the plan could bring in tells you what getting it right is worth.

Club Creator then sets the plan up and runs it — fees and member discounts, the enrollment portal, member pricing at checkout and the renewals — as Step 6 of the protocol.

Sources#

• New York Insurance Department, Office of General Counsel, Opinion 05-05-01, "Discount dental club" (May 2, 2005).
• State laws: Illinois In-Office Membership Care Act, 815 ILCS 628 (2019); Louisiana R.S. 37:798 (2019); Arizona Revised Statutes §§ 44-1799.91 to 44-1799.96; Florida Statutes § 624.27; Iowa Code ch. 135N; Texas Occupations Code ch. 117 (H.B. 541, 2025).
• National Association of Insurance Commissioners, Discount Medical Plan Organization Model Act (Model 98), § 5(K); Washington Office of the Insurance Commissioner, What medical providers need to know about offering discounts.
• American Dental Association, In-Office Dental Plans: Dental Membership Savings Plans or Direct Primary Care Agreements (2022).
• Delta Dental of New Jersey, Dental Insurance Claims Must Not Exceed Dentist's Usual Fees (October 17, 2018).
• Michigan Compiled Laws § 500.3405a; Connecticut General Statutes §§ 38a-479 and 38a-479b; Ohio Revised Code §§ 3963.01 and 3963.11.
• HIPAA: 45 CFR §§ 160.103, 164.502(e) and 164.504(e); HHS, Guidance on HIPAA & Cloud Computing.
• Restore Online Shoppers' Confidence Act, 15 U.S.C. § 8403; California Business and Professions Code § 17602.
• Virginia Administrative Code, 18VAC60-21-80; Texas Administrative Code, title 22, § 108.53; Florida Statutes § 456.062.
• 42 U.S.C. §§ 1320a-7a(a)(5) and 1320a-7b(b); HHS Office of Inspector General, Advisory Opinion 17-05 (August 30, 2017).
• This guide is general information, not legal advice; the laws it describes vary by state and change, so confirm your state's position with an attorney. Dr. Prachi Deore's results are those of one practice, measured in the platform; individual results vary.