Investopedia Followup: Why Dental Insurance Is Often a Waste of Money

On a recent dentist visit, I learned that I needed to have $1600 worth of work done on my mouth, none of which could be put off for more than a month or two. I normally don't have expenses that high, so I was pretty upset about my situation for several days and spent some time trying to figure out how I could reduce my bill. I learned that I was indeed stuck with the full bill, but that my intentional decision to not purchase dental insurance had paid off.

In my Investopedia article, Should You Bite On Dental Insurance?, I explain how dental insurance works. Below, I've elaborated on that explanation, including some numbers that help illustrate my point.

Let's say you have amazing teeth. You could go for five years without a cleaning and you still wouldn't have a single cavity. But, because you don't want to take any chances with the only set of teeth you have and your employer doesn't offer dental benefits, you decided to buy your own dental insurance. You get your teeth cleaned and examined the recommended two times per year, and you also get your recommended bitewing x-rays once a year (as opposed to a full set, which you need once every five years). Your total dental expenses per year would be $600 for insurance premiums, $0 for cleanings and exams, and $0 for bitewing x-rays. These services are generally considered "preventive" and are therefore free if you're insured. Congratulations, you've only spent $600 on dental work for the whole year! However, without insurance, you would have only spent about $350 total for the two cleanings and exams and $50 for the bitewing x-rays, a savings of $200. (Dental costs seem to vary regionally and sometimes with how long you've been a patient of the same dentist, so take these numbers with a grain of salt.) Here's a chart to illustrate the cost of being insured versus not being insured in a good year.

Good Year With Insurance Good Year Without InsuranceSavings by Having Insurance

Here's a loose approximation of what you'll spend for common dental work with insurance/without insurance:

Cleanings and exams: $0/$175 (for one cleaning+exam) (covered 100%)
X-rays, full set: $0/$150 (covered 100% every five years)
X-rays, bitewing: $0/100 (covered 100%)
Fillings, amalgam (silver): $26/$130 (covered 80%)
Fillings, composite (tooth-colored): $30/$150 (covered 80%)

Here's what you'd spend for big ticket dental work with insurance/without insurance:
Root canal: $400 / $800 (covered 50%)
Crown: $450 / $900 (covered 50%)

Now we can calculate your potential savings in a somewhat bad, but not really atypical year. You still need the exams, x-rays, and cleanings no matter what kind of year you're having, so with insurance you're starting at $600. Let's say you need three fillings and that you, like most people, prefer the more attractive, more expensive tooth-colored fillings. (It's important to note here that the cost of a filling can vary by over $100 per filling depending on the tooth being filled, the number of surfaces that have to be drilled, and the type of material being used to fill the tooth.) Let's say that you have two small, one-surface fillings on two of your front teeth and one larger, two surface filling on one of your molars. The regular price of these fillings is $120 each for the small ones and $180 for the large one, making the insured price for these fillings is $30 each for the small ones and $40 for the large one. Now you've spent a total of $700 ($600 in insurance premiums plus $100 for filling copayments). If you didn't have insurance, you would have spent $450 on the cleanings, exams, and x-rays, plus $120 each for the small fillings ($240) and $180 for the large filling. That's a total of $870. Now you've come out ahead for the year by $170 thanks to your insurance.

Average Year With Insurance Average Year Without InsuranceSavings by Having Insurance
At this point, you've had one good year and one okay year, and you've about broken even (you're behind by $30). You've also used up $770 of your $1,000 annual maximum, because the insurance company paid for $770 of your total bill and you paid the other $100.

Now let's dig into a really bad year. On top of the work described in the previous section, you also need a root canal and a crown. Ouch!

Now, not only are the root canal and crown incredibly expensive, but you only have $130 left in that annual maximum. That means that you don't get the full 50% copayment for these services, but rather, only $130 of the $1700 bill will be covered. You're not saving as much as you thought you were going to when you signed up for that insurance plan. Double ouch.

Bad Year With Insurance Bad Year Without InsuranceSavings by Having Insurance

Over a five year period, a typical patient might have three good years, one average year, and one bad year.

Five Years With Insurance Five Years Without InsuranceSavings by Having Insurance
How disappointing! You've actually lost money by being insured. Of course, the numbers can vary a lot depending on your situation. You may need more or less dental work done or you may have a $2,000 annual maximum. Your monthly premiums may be higher or lower. While it is beyond the scope of this article to calculate multiple scenarios, I've tried to illustrate a scenario that I believe will be common for a large number of people, as well as show you how I got my numbers so that you can run the numbers for your own situation.

Also, there is one way you might be able to get a good deal on dental insurance if it isn't offered through your employer and you aren't married. If you have a significant other that you live with but you aren't married (legally or otherwise), in some states and with some plans, you can qualify as a domestic partner regardless of whether you are a same sex couple. You may have to live together for a certain period of time, like six months, before you officially qualify. On the other hand, some insurance companies will make you jump through serious hoops to get your totally legit same-sex domestic partner on your insurance plan. It sounds terribly unfair, but I imagine the rules are in place to prevent people from claiming their roommates as domestic partners or something. (How this is good for the insurance company's bottom line is beyond me -- for many people, their only options are cheap insurance or no insurance. In most cases, I imagine that insurance companies are only losing money by preventing potential customers from getting insurance, regardless of whether they're in a relationship or the nature of that relationship. How does being in a heterosexual relationship make one a better insurance risk?)

To sum up, the lesson here is that you probably shouldn't buy dental insurance unless you can get it cheaply as part of a group plan that will get you significant discounts on both the premiums and the dental work itself. While the monthly dental insurance premiums don't cost much more than a basic cell phone plan, those payments really add up. Add to that a low annual maximum, and you're unlikely to win the dental insurance game, even if your teeth have frequent problems.

One final note: don't go into or add to your credit card to pay your dental bills -- most dentists will work out a payment plan with you if you don't have the savings or the cash flow to pay your bill all at once. Following your dentist’s recommendations for at-home oral care and not neglecting your regular cleanings every six months are the best way for most people to save on dental care.

Photo by greefus groinks


Chief Family Officer said...

Great post! I wish I'd known this stuff back when I was in grad school and was paying for dental insurance b/c I come from a family that's always had insurance and not having it scared me - yet the one time in three years that I needed a couple of cavities filled, the bill was huge even after insurance!

I did want to say that I think dental insurance through work pays off for us b/c the difference between paying for one person versus paying for a family of four isn't all that big. So that's another factor to consider in evaluating the value of dental insurance.

Suz said...

Great article. Wish you had written it a month ago. I just spent the past month researching whether to buy dental insurance for our family and came to the exact same conclusion. Everyone I spoke to (dentists, insurance brokers) all said the same thing: self insure is best if you don't get dental insurance through an employer.

Suz said...
This comment has been removed by a blog administrator.
Ryan from Minneapolis MN said...

I just got dental insurance. I went to the dentist for a broken tooth. The dental assistant and the dentist explained how DENTAL INSURANCE IS A FREAKIN SCAM! I spent $654.00 for a year of insurance. It covers $1200.00 worth of BASIC services. Much of any major work is excluded for the TWO YEARS. If I were to pay by cash/credit card I would be ahead instead of wasting money. It's NOT worth it. Pay as you go. Oh, if you lose a tooth and want an IMPLANT, expect to pay minimum $3500.00 per tooth for the cheapest oral surgeon in the U.S. All others are $5000 and go a lot higher if they need to do bone grafting, which is very common too. A full set of dental implants can run $100,000.00 Yes, One Hundred Thousand Dollars. The dentistry field is unbelievably expensive. I wish HMO's were forced to cover dental procedures. The insurance companies say it's "cosmetic" when you lose a tooth. But is it cosmetic when the rest of your teeth begin to shift, causing more problems. Save as much money as you can. If you ever lose a tooth, you are in for a shock like I was.