Why Dental Plans Aren’t Worth Their Weight in Premium For Retirees
If you’re coming off your employer plan and onto Medicare, you might have been surprised to find out that neither Medicare nor Medicare Supplements cover most routine dental services. So I understand why you might find it quite attractive to get on a dental plan in addition to Medicare. After all, who else will insure your million-dollar smile?
But allow me to reason with you. Because I believe that—in most cases—a dental plan just isn’t worth it. Don’t believe me? Using the pictured plan as an example, give me a few minutes to explain.
Scaling Benefits, Depleting Value
Way back when, Dental Plans had much better benefits. Their maximum benefits started on day one and continued until you dropped the plan. But people abused it. They got on a plan when they found out they needed a major surgery, let the insurance company foot the bill, and then cancelled the plan, getting away with no more than $30-40 in out-of-pocket costs.
The insurance companies needed to get smart if they were going to make any money. So what did they do? They fought fire with fire, and introduced scaling benefits. Now most plans do not grant you full benefits until much later, after you paid your dues in premiums. In the example below, the full benefits aren’t granted until 2 years. In other words, not until you spend $800 in premiums! The only thing the plan pays in full on day one is preventative services such as cleanings and exams.
Here’s where a dental plan can really get you: the maximum benefits per calendar year is $1000. This means you will never squeeze anymore than one grand out of them per year, no matter how long you’ve paid into the plan.
So what do you pay in premiums per year for this plan? Let’s crunch the numbers. $33.71/ month X 12 months per year = $404.52. So, for all intents and purposes, you pay about $400. Consider this: if you put the money you would’ve paid in premiums into a savings account, you would cover the maximum benefits in 2.5 years. So—as long as you don’t expect to spend well over $1000 in 2.5 years—why would you bother with a dental plan? For most people, it is just not reasonable.
You might’ve notice that you can upgrade your maximum benefits to $2000 dollars for an extra $7.61 in monthly premium. But did you notice the fine print? Without squinting, you probably didn’t. So let me help you out with the gist: despite the upgrade, major services will still not exceed $1000. In other words, for the services that actually have a chance of exceeding $1000 like dentures and oral surgery, the benefit limit is the same.
What to Do Instead
If you are still concerned about paying for routine checks, I would recommend telling the dentist you don’t have insurance and asking about “network pricing.” A lot of times they are willing to cut the price (as much as 50% for exams and cleanings).
And if you are still concerned about major services that are going to cost up to $1000 or more, I recommend saving up what you would’ve paid in premium to put into a savings account. In 2.5 years, you will have a thousand dollars of self-insurance for that million- dollar smile.
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