Have you ever received an explanation of benefits (EOB) or statement from your dental insurance provider, and stared at it puzzled wondering what on earth any of it meant? Rest assured that you are not alone. It’s common for us to pick a dental plan without truly understanding how our dental benefits work. Between the insurance jargon and trying to calculate what amount you actually owe, it’s normal to feel completely and utterly confused. Insurance can be tricky to understand, even for the savviest of people. So, we’re going to bring a little more transparency to three commonly misunderstood dental terms, so that you will feel like a pro when dealing with dental insurance.
How does dental insurance work?
Insurance in itself is a transfer of risk from you to your insurance provider. While this is true for medical insurance or car insurance, dental insurance has a different model. This is why many dental providers refer to what they sell as “dental coverage” and not “dental insurance.”
If you were to go the hospital for surgery, your health insurance provider would absorb the majority of the risk, which is the expense. This is unfortunately not true with dental insurance. Even with coverage, you are left paying the majority of the costs yourself.
Signing up for a dental insurance
Let’s say you’ve enrolled in a dental plan, visited the dentist and found out that you need a root canal and crown replacement. The cost of this procedure can vary widely based on where you live and even from one provider to the next. This is because providers are allowed to set their own prices, and do so based on the cost of living in the area.
For simplicity’s sake, we’ll say that your upcoming procedure is quoted at $1500. But since you have dental insurance, how much of that are you responsible for paying?
What is a deductible?
The first term that is important to understand is a deductible. This is the amount that you have to pay before your plan provider will start paying toward the cost of treatment. For example, if your dental plan has a $100 deductible but your procedure only costs $80, your deductible has not met. You’re responsible for paying that $80 out of pocket. Once your deductible has been met, you and your dental plan provider share the costs up to a certain amount.
But since you’re having a root canal and crown replacement done, you’ll meet your deductible out of the gate.
What is coinsurance?
Dental plans typically offer 100-80-50 coverage.
This means that they will cover:
- Up to 100% of routine preventive and diagnostic care, likes twice annual exams, cleanings and x-rays
- Up to 80% of basic services, like fillings, extractions, some root canals and other simple procedures
- Up to 50% of major services, like crowns, dentures crowns and bridges
Since you have dental insurance, you can expect that your plan provider will cover 80% of the $1500 you were quoted, which is $1200. You’re responsible for the other 20%, or $400, which is your coinsurance.
What is an annual maximum?
This is where it can get expensive. The annual maximum, also known as an annual cap or annual spending limit, is the total amount of money your plan will pay toward your cost of care within a specific benefit period. The average annual maximum for most dental plans is incredibly low, at just $1,000 to $1,500. Once you reach this amount, you’re responsible paying everything else out of pocket. This goes back to what we talked about earlier — even with dental insurance, you’re still responsible for the majority of the risk.
Is a dental savings plan right for me?
Now that you have a little more insight into how dental insurance works, and knowledge about three key components of it, you may be questioning if you want to continue your plan coverage. If so, there is an alternative to dental insurance known as dental savings plans.
If you enroll in a dental savings plan, you don’t have to worry deductibles, annual maximums or coinsurance. You pay a flat, discounted price on the work you need done. The discounted rate will save you money off usual dentist’s fees, depending on the plan you choose and the procedure. This includes discounts on work that dental insurance won’t cover, like restorative, cosmetic and orthodontics. Plus, since there is no annual maximum, you can visit the dentist as many times as you need, while still enjoying a discounted price.