Dental Insurance - How It Works

Dental insurance plans started in the 1960s as a means for helping pay for the costs of dental work. 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.

This isn't really insurance the way other things are. Insurance, in the traditional sense, is used to cover catastrophic expenses. For example, you pay for homeowners coverage in case something disastrous happens to your home. 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.

Usual and Customary

One way dental insurance companies limit their liability is to limit the amount of a dentist's fee that they will accept. This limit has been called the "usual and customary" fee. Their contract stipulates that the company will pay a certain percentage, say 50% or 80% of the "usual and customary" charges for a particular procedure. Setting such a "usual and customary" charge is reasonable for an insurance plan to do. Medical, homeowners, and auto insurance all have similar provisions. The company has to protect itself against possible price gouging. It can't guarantee payment no matter what service providers charge.

Historically, the "customary" fee has been arrived at through the use of surveys, and the insurance contract would specify, for example, that they would reimburse at the "80th percentile" level. This means that if 100 dentists were surveyed, and for a certain type of filling, say, 80 of the dentists charged $150 or less, and the other 20 charged more than $150, the company would allow the fee of $150 for that filling .Ethical codes were also established that said that the dentist would have to charge the same fee for this procedure for every patient. So, if they allowed a fee of $150, but the dentist's usual fee was $120, then that is the fee that would have to appear on the statement sent to the company. This is the foundation of the concept of the "usual" fee.

However, as time as gone on, and with the competition between insurance companies and the pressure put on them by employers to hold down the costs of policies, some companies have modified the definition of the "customary" fee. Contracts were modified and some removed the concept of taking a survey, and made the "customary" fee to be whatever they wanted it to be. Other companies have kept the survey concept and have simply become slow in updating those surveys. As dental costs escalated in the 90s from more stringent sterilization standards and dental employee safety standards, some insurance companies were just slow to update their surveys, which helped them hold down costs.

What's the bottom line for you as a dental patient? You should just be aware of some of the games that may be going on. If your dentist needs to know whether or not you have insurance before they know what the fee is going to be, be aware that they may be trying to manipulate the system. If your dental insurance company tries to accuse your dentist of charging fees that are too high, in that situation they're the ones who are being unethical. An honest response when their reimbursement doesn't cover the entire fee is a simple statement to that effect: "This fee is beyond the level of the allowed benefit." Anything accusatory in tone from them is considered unethical, and should be reported to authorities. Such communications by dental insurance companies are often an attempt to cover for a plan with limited benefits that was sold to your employer as a "cost-cutting" plan.

Preferred Provider

Many dental insurance plans have created lists of "preferred providers." Others call them "in-network dentists." The concept is the same.

Some of these plans offer two levels of "in-network" dentist plans for different amounts of money. Let me explain them so that you know what you're getting.

The fundamental principle you need to understand about these dental plans is where the interests of the company lie. They exist to make money for their stockholders. Your interest, however, is in your own pocketbook and the dental health of your family. It some cases, your interests are at odds with the company.

This foundation is essential to understanding what they mean by the term "preferred provider." To be "preferred" by the dental insurance company, the provider needs to save them money. That is the foundation of the whole system. When they solicit dentists to participate in their dental plan, they will usually present a list of conditions that the dentist needs to meet and a fee schedule that they need to charge. Different dental insurance plans are more or less restrictive. The most economical ones will place more severe restrictions on the dentist. For example, a dentist may have a usual fee of $900 for a crown, but the company says that they can only charge $700 to their patients. So the dentist tries to figure out if he or she can charge this fee. Maybe the dentist can use a cheaper lab or less expensive materials, or do it a little faster, or maybe just accept less profit.

For you, the decision about whether to use an in-network dentist or an out-of-network dentist should be a simple matter of economics. Is the out-of-network dentist worth the extra money you will pay for their services? Don't impart some moral superiority to the term "preferred provider" as used by your dental insurance company. Out-of-network dentists will tend to be fussier about their work, will spend more time on procedures, use more expensive materials, and may run offices that give lots of personal attention and even pamper the patient. To you, if that's worth the extra that you're paying, then do it. But if you need to save money on your dental care, you may want the cost-cutting in-network dentist.

Dental Insurance Lingo-Learning to Talk the Talk Will Help You Make an Informed Choice

Want to get the most from your dental benefit plan? You'll need to learn the lingo.

Understanding your dental insurance is the key to maximizing the benefits that it offers. But like anything, you must have a basic understanding of some of the key terms associated with dental insurance; this will help you sort through the complexities of your plan and net as many of those dollars as you possibly can.

Here's a crash course on "dental insurance-ese" that will give you the advantage in choosing-and using-your dental insurance benefits!

Who administrates your plan?

Third parties: These are the plan providers who provide the financial benefits for your dental insurance plan. There are three third-party types:

• Insurance companies: For-profit organizations that take on the financial risk of your benefit plan. They are the ones who will process your claim. Insurance carriers enter into a contract with either groups or individuals, and offer a variety of benefit packages.
• Dental service corporations: Not-for-profit organizations that negotiate and coordinate contracts for dental treatment, either for individuals or patient groups.
• Self-funded insurers: Employers that reimburse their employees for the dental care they receive. There are typically limitations on dollar amounts spent and treatments covered under a self-funded insurance plan.

Can you continue to see the same dentist?

If you currently have a dentist with whom you're comfortable, you'll want to be very careful about which insurance plan you choose.

Open panel plans allow you the freedom to choose your own dentist. They also allow any dentist to participate in their plan. These plans may also be called "freedom of choice" plans.

Closed panel plans allow you to see only dentists who are contracted to participate in the plan. There are two types of closed panel plans:

• Preferred provider organization (PPO): Under this plan, you can select from a group of dentists in your area who have agreed to provide treatment for less than their usual fee. If you choose a dentist who is not a "preferred provider," you will have to pay a greater portion of your dental bill.
• Exclusive provider organization (EPO): This is the more restrictive of the two closed-panel plans. Under this plan, you will be required to select your dentist from a limited number of dentists who have agreed to accept substantially reduced fees for their work. Participating dentists may even be salaried employees of the EPO. For this reason, many dentists do not participate in EPO plans, which greatly limits your choices. EPOs will often restrict your access to specialists and limit the amount of care you can receive each year.

How much dental care will you receive?

Each plan uses a different method to calculate your benefits and payments. Below are the most common payment schedules:

Usual, customary and reasonable (UCR): This is the payment schedule used for most traditional, fee-for-service benefit plans. The payments are usually made directly to the dentist, and are based on a fee schedule that was set decades ago (the "usual, customary and reasonable" fees). As a result, the fee schedules are quite low compared to the actual fees charged by dentists, and you wind up paying a good deal more out of pocket for the dental treatment you receive. However, with UCR plans, you are free to see any dentist you'd like.

Table or schedule of allowances: This benefit calculation method is similar to UCRs, but more restrictive. You may not be able to choose your own dentist, the level and quality of the care you receive may be lower than you'd like, and your access to specialists will be extremely limited. Under this payment schedule, a maximum dollar value is assigned to each procedure, regardless of what the actual fees for that service are in your area. If you are considering a benefit plan that uses this as their payment schedule, it's important that you ask how often the fees are adjusted to account for inflation, because you'll be expected to pay the difference.

Capitation (also called per capita): This fee schedule is usually associated with plans that predetermine a certain level of dental benefits that will be offered to you. If the plan administrator decides that a certain treatment is not covered, you will be responsible for paying for it. Quality of care is also compromised when this payment schedules is used, because frequently the amount paid to the dentist is actually less than the cost of providing that care. When this is the case, dentists have an incentive to under-treat; the more services they provide to you, or the more patients they see, the less money they make.

Other terms you should know

Predetermination of costs (also called preauthorizaton: This is a treatment proposal that your dentist submits to the administrator of the benefit plan prior to the beginning of treatment. The administrator evaluates the proposal, then makes a determination of the benefits they will allow, based upon your eligibility, covered services, and the plan's limitations. A predetermination of costs may be required by some plans when the proposed treatment exceeds a certain dollar amount. A predetermination of costs is helpful to both you and your dentist. It can help you to prioritize, plan and budget your dental treatment plan, making the best use of the benefits allotted for each year.

Coordination of benefits: If you have dual insurance coverage (for example, you and your spouse both have family dental coverage), coordinating benefits is essential, as it will maximize the coverage you receive from each benefits plan. You should notify the administrator of your primary plan (the one provided by your employer) if you have double coverage.

Non-duplication of benefits: Unfortunately, some plans have a clause that disallows overlap in benefits if you are covered by two dental plans.

Annual benefits limitations: Many plans have annual caps on the dollar amount and/or the number of treatments or procedures that you may receive annually. Find out what your plan's annual maximum is, and work with your dentist to maximize these benefits each year AND minimize your out-of-pocket expense.

Least expensive alternative treatment (LEAT): Most dental benefit plans require that dentists follow treatment plans that are based upon providing the option that is least expensive, even if a more expensive option would better suit your individual needs. If you choose a more expensive option, you will be responsible for the difference in the cost. Unfortunately, the least expensive treatment is frequently not the one that will provide you with the best long-term results.

Premium adjustments and re-evaluations: Both you and your employer should lobby the third party to regularly re-evaluate premium levels to be sure that the UCR or Table of Allowances payments are in line with actual fees charged by dentists in your area.

Peer review for dispute resolution: This is a system that is in place to resolve disputes between patients, third parties, and dentists. If a case goes to peer review, individual records, treatments and results are thoroughly evaluated before a resolution is recommended. This usually resolves any disputes to the satisfaction of all parties.

How do third parties categorize the services your dentist provides?

• Diagnostic: Exams, x-rays and other services that are used to evaluate your oral health and detect malfunction or disease.
• Preventive: Services that are designed to prevent decay and disease, such as dental cleanings, fluoride treatments and the application of sealants.
• Restorative: Fillings, crowns, inlays and onlays used to restore strength and functionality to decayed or damaged teeth.
• Discretionary (or elective/cosmetic): These are treatments that the third party administrator determines to be optional.

" The dental procedures we specialize in enhance our
patients' look and their quality of life! "

If you are in the Lansing area or you have concerns about dental health, contact us today to schedule a consultation. It is critical to address questions and concerns early on to help avoid the onset of tooth loss and serious periodontal disease.