How It Works

Dental insurance plans started in the 1960s as a means for helping pay for the costs of dental work. Labor Unions promoted them in contract negotiations with employers. The effect of these plans was not to decrease the cost of dental care, but to make that cost be tax deductible. Employers included these dental plans as part of their operating expenses, so they deducted them from their taxes. The Internal Revenue service adopted a policy that the benefits would not be considered income to the employee. As long as this policy continues, the offering of these plans by employers will make economic sense. These plans add a layer of bureaucracy to the delivery of dental care, which costs money, so they only make sense as tax shelters.

Dental plans aren't really insurance in the way other things are. Traditionally, you are insured against catastrophic losses. You pay your homeowners carrier thousands of dollars a year, and then if your home or property gets destroyed by fire, accident, or a crime, you are reimbursed for the damage and are able to keep your home. The money spent gives you peace of mind that you will be able to survive a catastrophic loss. Dental plans, on the other hand, are geared toward providing a maximum fixed quantity of benefits every year. The companies need to charge enough for the premium that they can pay for your benefits and have some money left over for their operating expenses and a profit. Dental expenses are a more predictable type of expense, and a dental plan doesn't really expose the carrier to any significant risk because every plan has an annual allotment of benefits.

Dental insurance companies have to take in more money than they pay out in benefits. That's common sense. So they are skimming from your dental dollar. But then, if you paid for the care yourself, you would be taxed on that money. It's the tax savings on the premium that keeps the industry going.

When you buy homeowners coverage, you realize that the company is making money from your premium, but you trade that slight monetary loss in exchange for the reassurance that should your house burn down or be destroyed in a tornado, they would cover the expense of another home, because you wouldn't be able to afford that. Dental plans operate in direct contrast to this concept, placing strict monetary limits to the benefits they will pay during a year. These limits will typically be between $1000 and $2000 per year. This isn't really "insurance," because it doesn't protect you from catastrophic loss. Instead it would be more accurate to call this a dental benefit plan. Rather than protecting you, the company is protecting itself from catastrophic loss. You are not covered in the event of catastrophic expenses.

Dental plans will also limit their coverage of cosmetic dentistry procedures, in order to control their costs. They usually completely disqualify them from any coverage. Read more about cosmetic dentistry and dental insurance.

Other dental insurance topics that we now have or will be added later to this site:

• Facts you should know about dental plans - It isn't intended to be coverage for all your tooth care needs. You will be the least frustrated with it if you take it for what it is-a benefit to help you defray some of your dental care costs.
• A discussion of Delta Dental plans and some of the trickery they employed to try to manipulate the dental marketplace.
• Privately purchased dental plans - When you buy it as an individual, you are getting a benefit plan that is very different from what an employer will provide. This page will help you understand how this type of coverage works.
• Dental plan limitations - These companies have many provisions in their contracts to limit their costs. This page will help you understand those limitations.
• Preferred provider - Many plans feature a list of "preferred providers" or "in-network dentists."
• Usual and customary fees - These companies set a "usual and customary" fee for each recognized procedure. Here's how that system works.
• Company tactics - There are many tactics that they use to help control costs. Some of them are reasonable, but some are deceptive and manipulative.

Read Dr. Hall's blog posts about dental insurance, where he answers questions from visitors.

This information is provided for you by the mynewsmile.com cosmetic dentist referral service, and was personally written by Dr. David Hall.