Someone smarter than me told this about dental insurances. Imagine you are playing in the yard with a chainsaw. An accident happens and the chainsaw chops off all of your fingers. You collect the pieces and shop up in the ER. The nurse first laughs at you then proceeds to explain to you how the process will work.
With medical insurance you get rushed to the operating room, they put you back together and off you go with the bill getting sent to your insurance company. Maybe you have a bill for copay or deductible, but you are off to the races again.
With dental insurance the nurse will then ask you which finger do you want to attach this year? And next year? But not to worry, they will have all 5 of them attached before you know that 5 years are over! THEN you will also have a deductible, a copay and maybe a bill...
So what gives? The reason is, medical insurance don't work quite like dental insurances do.
...insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.
From Julia Kagan's article on Investopedia "Insurance: Definition, How It Works, and Main Types of Policies"
Insurance by it's definition spreads the risk amongst all of their clients. So how does dental insurance work in comparison? Dental insurance is arbitrage. The only reason it exists is because doctors due their low business acumen accept a discount on their services in exchange for the patients. The insurance company then goes and "sells" this discount to the patient in essence, but not without collecting the premium first to cover dollar for dollar what they would pay out. So the risk is not spread amongst anything or anyone. You, the patient, is carrying the risk, you, the patient, is paying for your services. They just pocket the difference.
Time for an example.
Cleaning costs $100.
Insurance company negotiates with the dentist to get it for $80
Insurance company then goes to patient and sells them $8 per month cleaning policy with 12 month contract. At the end of the year they pay the dentist $80 (if you actually went that is), you pay $96 and they pocket $16 for no work. You might say - well, that still saved me $4. You are missing the point! YOU PAID FOR THE SERVICE. They DIDN'T pay ANYTHING! Your dentist is the one who gave you the $4 discount through them.
You are ten times better off negotiating discount with dental office directly and allow market mechanics dictate the price. Any dentist in their right mind would gladly take 5-10% discount on their fee vs a 20%. We will talk about how discounts cut into business profitability at later date. But these are the mechanics of dental insurances.
WAKE UP!
There is a scenario where you are given insurance as the benefit through your work and you can not negotiate it into your salary. Use it or loose it type of situation. In that case. Pick anything with this thought in mind: you get what you pay for. Think the hamburger in McDonalds that looks like hamburger in Ruth Chris is still same hamburger? Economics.
...hope to be of service, my dental assassins...
C-Bud, DDS
