Dental Insurance
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:
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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. |
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A
discussion of Delta Dental plans
and some of the trickery they employed to try to manipulate the dental
marketplace. |
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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. |
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Dental plan limitations - These companies have many
provisions in their contracts to limit their costs. This page will help
you understand those limitations. |
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Preferred provider - Many plans feature a list of "preferred
providers" or "in-network dentists." |
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Usual and customary fees - These companies set a "usual and
customary" fee for each recognized procedure. Here's how that system
works. |
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Company tactics - There are many tactics that they
use to help control costs. Some of them are reasonable, but some are
deceptive and manipulative. |
