What Does “Annual Benefit Maximum” Mean in My Dental Insurance Policy?

All dental insurance plans refer to an “Annual Benefit Maximum” in their summary of benefits.  Sometimes this is also called “Annual Plan Maximum,” or “Annual Maximum.”  What does this mean.

The Annual Benefit Maximum of a dental insurance plan is the most benefit in terms of dollar amount you will receive (the dental insurance company will pay out towards your claims) in the policy year of your policy.  The majority of dental insurance plans offer a $1,000 Annual Benefit Maximum.  Thus, $1,000 is the most benefit you could hope to receive from the dental insurance plan.

The Annual Benefit Maximum is not based on the total amount of the dental services you receive, but on the total amount of benefit the dental insurance company pays out on those services.  Let’s use a simple example to make this point clear:

I visit the dentist in 2009 three times,

Visit 1, an exam and cleaning, total bill, $150. (My dental insurance plan pays 100% of this visit type)

Visit 2, a root canal, total bill, $850. (My dental insurance plan pays 50% of this visit type)

Visit 3, an exam and cleaning, total bill, $150. (My dental insurance plan pays 100% of this visit type)

Did the dental insurance plan only pay claims on the first two visits, since they total $1,000 in total costs?  No!  My dental insurance plan paid on all three claims, since the total paid out, $150 for the first claim, $425 for the second claim (50% of $850) and $150 for the third claim totals $725, under the $1,000 Annual Benefit Maximum.  In this example, I actually have $275 remaining in possible benefit for the remainder of the plan year.

Many people I speak with about dental insurance wonder if the Annual Benefit Maximum is going to be enough.  The maximum seems a bit low at first glance.  I answer this with claims data from the dental insurance companies I work with.  Each insurer has a slightly different number (from researching their claims), but on average, 93% of the time, this $1,000 Annual Benefit Maximum was enough to cover one’s dental costs for the year!

Of course, there is that other 7% you could fall into one year, the year your dentist tells you she recommends 3 root canals!  But, I have found, through personal experience, and from hearing my customers’ experiences, that your biggest advocate in keeping under the maximum is your dentist.  They and their staff are familiar with your plan, and will usually try to maximize your benefits. 

Here’s an example of what I mean.  I went to see my dentist a few years back, sometime just before Thanksgiving.  After the exam, she explained I had two cavities that needed a filling.  But, with where my dental insurance plan’s Annual Benefit Maximum was sitting, only one cavity would be covered before the Annual Benefit Maximum would be met.  So, she scheduled one filling for December (the cavity that needed immediate attention), and the second filling for January (the Annual Benefit Maximum for my dental insurance plan started over January 1)!

“Why are Braces or Invisalign NOT Covered Under My Dental Insurance Plan!?”

In my work as an insurance broker, I spend a lot of time going over the details of “what is covered” with the dental insurance plan I and my client have chosen.  One of the most frequently asked questions I receive when speaking with people is this,

“Why are braces or Invisalign NOT covered under my dental insurance plan!?”

This is unfortunately true.  Most dental insurance plans I work with, whether purchased individually or offered as an employee benefit, cover (pay a benefit of toward the cost of) braces and Invisalign, but only for those age 19 or younger.  The insurance companies are helping to pay for children’s coverage.  But, it seems as if insurance companies are not recognizing, and offering benefits for the growing trend of adults (19+) utilizing the services of their dentists to straighten their teeth.

Why?  The answer boils down to the definition itself of “risk” for an insurance company.  If an insurance company offers coverage and charges premium to a random and diverse group of people, and roughly half of the individuals need to file a claim, everything works correctly.  There is enough money from collected premiums to pay all claims, pay administrative costs, with a small amount left over for the insurance company.

This very simple definition of a good risk applies to covering braces and Invisalign for children (-19) on dental insurance plans.  The insurance company offers this benefit to all children covered by the plan.  But, only a percentage of the children need braces or other corrective procedures performed.

Insurance companies are thus wary of offering true dental benefit coverage for adults (19+) because of adverse selection.  If a product such as this were offered, with the premium justifiably a bit higher than other comparable dental insurance plans, the only people who would choose the dental insurance with orthodontic coverage for adults would be the adults who know, or who are considering, braces, Invisalign or other orthodontic procedures.  With close to a 100% claims rate, the plan would falter financially  (more claims paid out than premiums coming in), and eventually close.

I am not sure if we will ever have a true orthodontic benfit for adults in dental insuance plans.  The few plans I have found on the internet that proclaim to offer benefits for braces and Invisalign for adults are not true indemnity dental insurance plans, but discount plans.

How can you choose braces or Invisalign as an adult, while softening the financial burden of the cost?  Here are two ideas:

1.  Does your employer offer a Flexible Spending Account (F.S.A.)?  With an F.S.A. you can set aside monies from your pay on a pre-tax basis to pay for qualified medical expenses, as outlined by the I.R.S.  Braces and other orthodontic procedures count as a qualified medical expense.  Paying for braces or Invisalign procedures through your F.S.A. would allow you to see an approximate 20-25% reduction in costs, realized through less Federal and State taxes paid. 

2.  With a Health Savings Account (H.S.A.) you might have through your health insurance plan, you can also pay for braces, Invisalign or other orthodontic procedures “pre-tax,” as they count as a “qualified medical expense.”  Again, you would see an approximate 20-25% reduction in costs, realized through less Federal and State taxes paid.