Vol. XV, No. 2
February 2007

Dental Plans

Insured Dental Plans

A dental insurance plan can include both group (through an employer) and individual (voluntarily purchased) products.  Common annual maximums are $1,000 to $2,000 per year.  If orthodontia is covered, it often has a lifetime limit of anywhere from $1,000 to $3,000.  Three types of plan designs can be chosen:

1)   Type A is a scheduled benefit or indemnity amounts; for example, a plan may pay $300 for a crown, but if the dentist charges more for that crown, the additional amount is the responsibility of the insured.

The advantage of the Type A scheduled benefit or indemnity amount design is that plan premiums are usually more stable than the Type B flat percentage plan.  This is because the annual inflation of dentist’s operational fees, e.g., rent, salaries, and dental materials such as the metals used by dentists, has less effect on Type A premiums than Type B premiums.  

2)   Type B is based on a flat percentage (co-insurance) of the dentist’s fee; for example, 100% for a cleaning once or twice a year, or 80% for a filling with the insured picking up not only the 20%, but also any deductible required before the plan pays anything up to the annual maximum.

The most popular Type B plan design is one that pays 1) 100% for preventive services; 2) 80% for basic restorative services, e.g., fillings; 3) 50% for major services, e.g., crowns, bridges and dentures; and 4) 50% for orthodontic services (braces). 

3)   Type C plan design consists of dental maintenance organization benefits.  Some benefits may be limited to a deductible.  Some procedures are typically excluded, e.g., dental implants or replacement of bridges for bridges that were placed less than five years previously.  Some Type C plans also provide “Preferred Provider Organization” options for reducing the insured’s costs by having the insured use dentists contracted with the plan who have agreed to reduce their fees. 

Type C dental maintenance organization plans operate like health maintenance organizations.  The participating general dentist receives a monthly payment per subscriber whether the patient(s) come in for treatment or not.  For this payment, the dentist is responsible for providing certain services at no additional cost to the insured, e.g., the office visit charge, the examination fee, x-rays and cleanings.  Then the plans typically provide a schedule of subscriber charges for services at pre-determined maximums which the insured must pay, usually discounted between 25% and 75% off the usual, customary and reasonable fees of dentists in a particular area.  Services not covered in the schedule are usually discounted, e.g., 25% off for using a participating plan dental specialist such as an endodontist for root canal therapy procedures or periodontist for gum surgery procedures.

The advantages of this plan design are: 1) the insureds know in advance how much each service will cost them, if anything, in addition to the premium; 2) there are no claim forms; 3) premiums are much lower than Type A or Type B plan designs; 4) premiums are typically more stable than Type A or Type B plan designs since the plan has less risk for inflationary dental fees; and 5) except for the “prepaid” or “free” services that have limited frequencies of use, there is no limit on the amount of services provided at a maximum subscriber charge.

The disadvantages are: 1) a discount off a dentist’s fee does not provide the insured with any assurance that the fee was not inflated before the discount was taken; and 2) participating dentists tend to drop out or stop taking new patients once they have been able to fill their office time with customers who pay their regular fee.  As a result, Type C plan designs are the least popular Insured Plans.

Group versus Individual Plan Designs

Group plan premiums can vary based on geographic location, previous claims experience and the amount of benefits provided.  It is not uncommon to see premiums as high as $30 to $40 per month or more for individual subscribers, and upwards of $100 a month or more for family subscribers, usually with an employer subsidizing at least part of the premiums.

Individual plan premiums can run about the same as group plan premiums.  Options to reduce costs are: 1) increasing deductibles; 2) reducing the types of benefits covered, e.g., excluding orthodontia and/or major benefits; and/or 3) reducing the fee schedule of benefits reimbursed to plan participants.

Discount Dental Plans

Discount Dental Plans are the second kind of dental plan.  These plans provide no actual insurance.  They offer discounts that typically range from 20% to 45% off the dentists’ usual, customary and reasonable charges.  Advantages include: 1) no dental inflation risk; 2) lower in cost, as low as $3 a month for an individual, or $6 a month for a family; and 3) usually a larger number of participating dentists than in PPO or DMO plans.

Disadvantages include: 1) these plans are often not successfully marketed because every time a service is rendered, the plan participant has to usually pay 55% to 80% of the dentist’s fees; and 2) the plan participant must look up on the Internet or call a toll-free number to verify if the dentist they want to use is still participating and what the discount fees are for specific procedures.

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