The Trouble With Dental Insurance

I get asked -- all the time -- about dental insurance. And it's almost never a good conversation. In fact, it's usually along the line of 'why is dental insurance so lousy?'
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I get asked -- all the time -- about dental insurance. And it's almost never a "good" conversation. In fact, it's usually along the line of "why is dental insurance so lousy?"

And my patients have a point -- dental insurance typically is pretty lousy, for the patient and the dentist. There's not enough coverage, too many things aren't covered at all, the co-pays are too high, and the limitations are fairly strict. But why is this so?

Well, to tell you the truth, there's really just one reason it's so bad: dental insurance is simply not profitable to insurance companies. Now, why isn't it profitable ... well, there are lots of reasons and speculation for that. I wish I could say "well, it's because of XYZ, and if that gets fixed, it's all sunshine and rainbows" (or fillings and root canals if you prefer). But that's just not so.

However, as a NYC Cosmetic Dentist, I do have a lot of firsthand experience with dental insurance, and can offer you my views on why it's not profitable for insurance companies (and thus, why it's so lousy). Keep in mind that the following are more opinion than anything else. That said, I'm pretty confident many insurance executives -- if asked why dental insurance is bad -- will cite reasons similar to my thoughts in this post.

Dental insurance first started in the mid 60s/early 70's. Delta Dental offered insurance with a $1,000 cap in 1972. And $1,000 bought a lot of dental care in 1972.

Today, the average cap on dental plans is ... $1,000.

Wait ... what? No, you read that right -- it's still $1,000 (on average).

So in about 40 years, the benefit has not gone up. We all like to demonize insurance companies, but in all fairness, they have raised caps on nearly everything except dental insurance. That should tell you something about the business model of dental insurance.

So why isn't offering "good" dental insurance profitable? Here are a few thoughts from me:

  • The "use" factor. In plain terms, dental insurance almost always gets used, oftentimes, right up to the max. This is not so with other types of insurance. In fact, the entire profit model of insurance is based on a certain percentage of people not using it. Contributing to this is the built-in "twice yearly" cleanings and such that are recommended.
  • Pre-existing conditions. Many dental problems are often ignored for years. So the feeling is that many people will "save up" their problems until they get dental insurance. Then bam - three root canals, two crowns, and a bridge. This happens so often that many dental insurance providers have a waiting period of one year for any major work (and lower caps on maximum coverage). I can tell you from personal experience that I have seen countless patients with a mouthful of problems that really should have been handled earlier, but weren't due to lack of funds.
  • Dental problems are more commonplace than many other health problems. There are very, very few people out there with no need for dental work at all. This relates to my first point -- use. Almost all people with dental insurance will use it to a certain degree every year. Conversely, looking at typical health insurance as a comparison, a great number of healthy people will often go years without seeing a doctor.
  • The total cost of work is lower, making it difficult for an insurance company to charge a high enough rate to offset the "people using it" factor, but also for the rate to be low enough to be "worth it" to the typical consumer. Put another way, you have health insurance not only for routine doctor visits, but for "catastrophic" events. After all, an operation/hospital stay could bankrupt you. Thus, even at high premiums, health insurance is a must have for most people.
  • But look at dental work -- really, what's a reasonable "bad" scenario for dental work? $5,000 a year? Ok, let's even double that to $10,000 -- how much premium are you willing to pay to protect against that? I'm going to guess the answer is "not much."

    Let's do some expanding on that last point. We can assume because of a fairly low "worst case" dollar number, patients will not be willing to pay all that much for the premium (and rightfully so). But the insurance company knows if they provide coverage, it will get used to a degree (at the very least for twice yearly cleanings/checkups, and yearly x-rays). So to make a profit, they have to charge more than what that will cost, and then also average out what will get used beyond that. Very, very quickly the premium cost will add up to where it's not really worth doing, because the worst case isn't "lose your shirt" territory.

    So really, we're all sort of stuck. To provide "full coverage," an insurance company would have to charge more for premiums than a consumer would deem worth spending. So we get this hybrid "this is covered up to that amount/waiting periods/low maximums/no coverage at all" scenario that we're in. Which really helps nobody -- insurance companies don't like it, as a dentist, I don't like it (I don't like being told what I can and cannot do -- heck I could write an entire post on that subject alone), and worst of all, patients don't like it.

    There are no easy answers. But at least now you sort of have an inkling as to "why?"

    Ok, what say you -- what do you think about this subject?

    Until next time, keep smiling.

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