Dental Insurance

Overview

Dental insurance is a term that is used to describe many various dental plans that are available for patients. Although each plan is designed to make dental care more affordable to the patient, some plans have significant disadvantages that need to be considered.

Traditional insurance

This type of insurance is also known as the “fee for service” or “direct reimbursement” insurance and is the recommended insurance model according to the American Dental Association. Under this plan, the monthly premiums paid to the insurance company are used to cover the dentist’s fees if the patient needs dental work. This type of plan allows the patient to choose their dentist. Unfortunately, very few insurance companies now offer this plan because these plans are not as profitable to the insurance company as other plans in which they provide much less benefits to the patient. However, due to patient dissatisfaction with the other plans, “fee for service” plans have recently seen a large increase in demand.

PPO Insurance

This type of insurance provides defined, limited benefits to the patient. For example, the PPO plan might pay 50% on crowns. However, stating the benefit in such a way is very misleading. This is because the 50% is calculated based of a total fee which is set by the insurance company. The insurance company calls this fee “Usual, Customary and Reasonable” or UCR, although because of the methodology of the calculation of UCR it rarely represents actually dental fees in an area. This is because UCR calculation usually involves discount clinics, government clinics and other very low fee dental providers which greatly skew the average down. For example, while the average price for a crown at a dentist in an area might be 900$, the insurance company will say the UCR fee as $600. Furthermore, PPO dental benefits are often capped at a certain amount per year, which is generally $1000. Unfortunately, this amount has remained constant over the last 30 years, even as the insurance premiums and general consumer costs have risen due to inflation. If the annual maximum was properly adjusted for inflation, it should be at least $3600 today. The final issue is that an insurance company can actually deny any specific benefit. For example, if a dentist determines that patient needs a crown, the insurance company can refuse to pay for the crown and recommend a filling instead. This creates a problem because the insurance company never examines the live patient and the determination as to what they will pay for is made by a “claims adjuster” who is not a trained, licensed dentist. The issue often comes up with silver vs. white fillings. Many patients, for example prefer white fillings because of their ability to match the tooth color and be essentially invisible as well as some potential concerns about mercury in silver fillings. However, many insurance companies will not cover white fillings at all, stating that a silver filling is “good enough” for the patient. Because each patient’s oral health condition is unique, only a trained dentist can properly diagnose and recommend appropriate treatment. In the case where the insurance company denies this recommended treatment, the patient either has a choice of paying for the recommended treatment in full on their own (despite having a PPO plan that says it covers this treatment) or getting inferior treatment that the insurance company will pay for.

The PPO plan relies on dentists to “sign up as a preferred provider” (also known as being a “plan” dentist), meaning they will accept the UCR fee set by the insurance as the maximum fee they will charge patients on that PPO plan, essentially accepting to do dental work at a discount. The insurance company therefore now can justify their use of the UCR fee because dentists are accepting it as their maximum fee so it becomes “Usual”. Unfortunately, in many cases, the UCR fee barely covers the amount it actually costs a dentist to provide the service, considering the cost of materials, staff, office rent, electricity etc and of course the dentist’s actual time and service. Dentists who sign up as a preferred provider generally do so in order to provide a service to the community by allowing patients on the PPO plan to get dental care at a discount.

The main advantage of a PPO plan is that a patient is actually allowed to see any dentist they wish. Therefore, it is not necessary to look for a “plan” dentist, and a patient can find a dentist they are comfortable with or that is close to their home or work. In such a case, the insurance company is still obligated to reimburse whatever % of the UCR fee is stated in the contract for each procedure (assuming they approve the procedure). Of course, if the dentist chosen is not participating in the plan, they are charging their normal fee, which unlike the UCR fee is actually representative of the cost and value of the service they are providing. Therefore, in this case, the portion the patient will have to pay will be higher. In such a case, the insurance company will often send the patient a letter stating that dental fees are higher than usual and customary. It is important to realize that, as explained above, the UCR fee is not representative of actual dental fees and that in reality, all private practice dentist’s fees will be higher than the UCR fees.

Overall, PPO plans provide useful benefits to patients, but these benefits are extremely limited relative to real prices of dental care today. Patients should consider PPO plans as simply an aid to paying for their dental care and never as a real “insurance” against dental expenses in the way medical, automobile or home insurance insure against significant unexpected expenses. If a patient is choosing a PPO plan, it is important to be very familiar with its limitations and overall it is recommended that a patient choose a dentist that is highly qualified and that they are comfortable with rather than deciding on a dentist based on who is a “plan” dentist.

HMO Insurance

This insurance gained in popularity as a cost-saving measure but quickly became the lest popular option for dental insurance due to the same problems as the medical HMOs. This type of insurance pays the dentist a fixed amount per patient per month, usually much less then the patient or patient’s employer pays the insurance company. The dentist is then responsible for providing all of the care required for that patient. This causes serious issues in delivery of high quality care because in this case, the dentist will often lose money if patients need a lot of dental work. For example, if a dentist is paid 20$ per patient per month, but the patient then needs several crowns (which would normally cost several thousand dollars), the dentist is obligated to provide the crowns for free. Obviously the cost of providing those crowns greatly exceeds the per month allowance provided by the insurance company. Unfortunately, this causes most dentists on this plan to want to under-treat or delay treatment of dental problems because they essentially lose money every time they perform any kind of procedure on a patient. Today, very few private practice dentists accept HMO. If an HMO dental insurance plan is your only option, it is best to seek care at a dental school or at a government-run dental clinic, whose primary purposes are to serve the community and who are therefore able to provide excellent dental care to HMO patients because they are not worrying about staying in business.

Insurance Alternatives

Due to the inadequacy of the PPO and HMO models to allow affordable dental care while appropriately compensating dental practitioners for their work, many new approaches to dental care have been created. One is dentist-run discount plans, which bypass the insurance company by offering discounts directly to patients. In general, it is estimated that on average only 80 cents on $1 insurance premium is paid out (this is known as the "claims loss ratio") [2]. Furthermore, this is can be misleading because that ratio can vary greatly based on the insurance's current claims experience as new claims are routinely delayed or denied if the "claims loss ratio" starts rising significantly. In fact, insurance consulting companies focus specifically on reducing actual claims loss ratios in a way that still enables the insurance company to report high claims ratios to insurance seekers [1]. Therefore, by offering discount plans directly to patients or large employers, dentists can provide up to 50% more dental services for the same cost to the employer or individual.

Another solution is Dental Savings Accounts which are savings plans that are funded by the employer or individual with pre-tax dollars and can be used to pay for any dental expenses (including cosmetic services). These are very similar to the Health Savings Accounts created in 2003. The great advantage with these plans is that by bypassing the insurance company, all of the money set aside is used for dental care, vs. only about 45% with traditional insurance [3]. With DSA’s, the patient is free to choose any dentist and have the best, highest quality treatment without having to worry about insurance payment authorizations.