How It Works
Dental insurance plans began in 1954 in California when dentists got together to organize a dental service organization as a means for helping pay for the costs of dental work. The concept spread in the 1960s, and in the 1970s they became popular with labor unions, who promoted them in contract negotiations with employers. When promoted as an employee benefit, their effect was to make the cost of dental care be tax deductible. Employers included these dental plans as part of their operating expenses, so they deducted them from their taxes. According to the tax code, these benefits are not 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 savings.
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, because you could not afford to replace your home on your own.
Dental plans, on the other hand, are geared toward providing a maximum fixed quantity of benefits every year. These limits will typically be between $1000 and $2000 per year. So you aren’t protected against catastrophic loss. This seems to work out because catastrophic losses are uncommon in dentistry. When they occur, they are usually either because of neglect or some type of accident. In the case of an accident, accident insurance will usually take over.
Because of this structure of dental plans, I advise people not to think of dental services as being “covered” by “insurance,” but to look at the plan as an aid in helping them pay for dental care. For example, the insurance company may tell you that they don’t “cover” dental implants. However, they will offer an alternate benefit and may pay you according to their fee schedule for a removable partial denture, a much cheaper service. I would tell you that if you want the dental implant because you want a higher quality of comfort, make your own decision and take whatever the dental plan will pay toward that service that you want. Don’t limit yourself based on what the insurance company tells you. Their interest is totally in saving money. Your interest is in your long-term health and comfort.
Some patients, after a period of neglect, realizing that they are now going to need thousands of dollars of dental care, look for a way to purchase dental insurance on their own and are frustrated when they can’t. They don’t understand that dental insurance companies need to charge enough for the premium so that they can pay for your benefits and have some money left over for their operating expenses and a profit. And, as I mentioned above, they are not really in the risk management business but are an administrative tool for delivering fixed benefits and making dental care tax deductible. There are private dental plans available for purchase by individuals, but these plans are the result of companies negotiating fee discounts with a very limited number of providers in exchange for an enrollment fee you pay to the company.
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:
- A discussion of Delta Dental plans and some of the trickery they have employed to try to manipulate the dental marketplace.
- Privately purchased dental plans—When you buy a plan 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—Insurance companies have many provisions in their contracts to limit their costs. One of those provisions is to set up a network of preferred providers or “in-network dentists.” You need to understand that they are preferred from the insurance company’s point of view but may be the least desirable dentists from the patient’s point of view.
- Another provision to limit their exposure is to limit their reimbursement to what they call usual and customary fees. Here I explain what that means and how the insurance companies come up with those fees.
Read Dr. Hall’s blog posts about dental insurance, where he answers questions from visitors.