Car crashes are unpredictable and rare, so it makes sense to insure them.
Regular car maintenance is predictable and tends to happen in (almost?) every insurance period, so it's not - some payment plan or bundling may be an option, but insurance makes no sense, it would only be more expensive than paying directly because of an extra middleman.
Getting a broken leg or cancer is unpredictable (there are individual risk factors, but they are just as relevant for car crashes) and rare, so it makes sense to insure them.
Dental care, on the other hand is common and regular - e.g. someone who didn't have coverage for broken leg or cancer most likely won't get a broken leg or cancer in the next year, but all the people who have been unable to afford dentistry generally almost all will need dentistry in the next year. Some payment plan or bundling may be an option, but insurance makes no sense, it would only be more expensive than paying directly because of an extra middleman. If you are unable to afford dentistry, then you'd be unable to afford the insurance price hike.
It's not a problem of insurance as such, it's a problem of who pays for healthcare of poor people. USA has a weird historical artifact in that in the last >100 years insurance has become almost a synonym for employer-funded healthcare payment plans, not as real insurance. If you want employer-funded healthcare to include dentistry, then that's not going to be solved by medical people but the employment market - industries where workers have market power (e.g. IT) will get such conditions, and industries where worker's don't have market power (e.g. fast food) won't. Also, this can't solve the manner of dentistry for unemployed or underemployed people who don't get employer-funded insurance and thus a dentistry-included insurance would be as expensive or more than just paying for a dentist.
And how is that anything useful anyway? It's not like dentistry is any cheaper when your employer pays for it. If anything it will be more expensive because of the added bureaucracy and separation of who pays from who benefits. This is one of the reasons costs have spiraled out of control in the US healthcare market. If you need money for dentistry, ask your employer for a raise, not dental insurance.
Yes, real insurance (like car insurance or renter's insurance) will always have an expected value that is negative - the expected sum of all future payouts must be less than the sum of all future premiums paid. So insuring against completely predictable events is never worth it unless someone else pays for it, and even then it's less efficient than if they gave you the extra money directly.
Not all dental and vision benefits are completely predictable and routine, but the overwhelming majority of covered benefits are, unlike health insurance (which isn't really "insurance", despite the fact that we use the term).
It's worth it if the government guarantees it. Dental insurance might not be a good business to be in, but nevertheless people need it. It's a market failure, and it needs government intervention.
If you're arguing that "someone" ought to pay for dental care that's a different matter that doesn't really have anything to do with insurance per se.
ADDED: And one actually gets into cost discussions about things like crowns and alternative treatments with dentists. It actually seems like a good model of how healthcare spending should work. Yeah, I have insurance that pays some but thats orthogonal to the cost discussion I have with my dentist.
No bureaucratic solution involving government-subsidized dental services is going to produce a better outcome than taking the same money and giving it to those people in cash.
What are you proposing, price controls? Then what do you do when your dentist quits to become a real estate broker?
If I was proposing anything, it'd be to make it easier to become a dentist.
Many more people would like to become dentists than are accepted into dental schools.
http://www.adea.org/publications/Pages/2009-Applicants-and-E...
Of course having standards is good for patient outcomes. That said, I bet lots and lots (and lots and lots) of the rejected applicants would be fine dentists.
Would you bet your root canal on it?
The fact that there are more people who would like to do something than there are people who are capable of meeting the performance qualifications for it isn't an inherent problem. Only 0.6% of Navy recruits end up becoming SEALs despite 50% of recruits expressing interest. I'm sure there are many, many Navy sailors who would be fine SEALs, but that's neither here nor there.
Unless you're referencing specific evidence that the qualifications are systematically too strict[0], then it doesn't mean much to say that there are rejected applicants who would be fine dentists. And to be blunt, I think it'd be easier to make the case that they're not strict enough.
[0] The working hours and revenue of dentistry practices are not evidence of this
It's not really the case that we learn anything about the capabilities of applicants from the rejection, the number of people admitted to dental schools isn't adjusted to account for particularly good or particularly bad applicant classes.
That isn't the problem, it's the reason why giving them cash is better. Because if they can't afford to put gas in their car to get to work, using that money will keep them from borrowing it from the credit card company. And then in six months they'll still have $500 less credit card debt plus having not paid 25% APR for six months.
The only way it doesn't pay for dental care is if they don't buy dental care at all because they need something else more. But if they're correct to do that because the other things really are more important, what kind of idiots are we to think we should be finding a way to redirect the money back to dental care?
The only real solution then is to get them enough money that they can pay for the dental care and the more important things.
Based on the bill breakdown I get from my dentist, it appears negotiated rates are a thing here too. I regularly see a total price, an insurance discount, and paid-by-insurance amount. The 'discount' ranges from 10-50% depending on the service.
That's just an example of bad policy, not a reason to encourage that as a solution to the problem. If buying dental insurance or dental services is tax deduction when paid by the employer but not the employee, fix your tax code.
And your dealer would probably be happy to sell you an extended warranty or something else along these lines and pocket the nice margins.
I have a wife and two kids. Three cleanings, a surface filling, and a sealant, was $800. This is our experiment going without dental insurance. We'll see how it goes this year.
Though I'm putting $600/month into the HSA since our health insurance through Honeywell sucks, and they have dropped dental. I'm waiting for them to drop health insurance.
That fits fine for things like cleanings, cavities, and implants - but what about impacted wisdom teeth and resultant issues? Broken teeth due to impact injuries? Even people with excellent dental hygiene have a decent chance of chipping a tooth, and even those types of things aren't covered under medical insurance.
Get cancer? That could be a million dollars in treatment. You need insurance.
Get a bad tooth? Maybe 3k max to replace it with a bridge or similar.
The idea is most people can scrouge up 3k but not a million bucks.
The reality is far from that, though. Roughly a third of the citizens of the US would have to go into debt to secure $3K on the spot, they don't just have that laying around in the bank. Doing so could easily cause a downward spiral where one would have to choose between basic necessities or moving back in with family for months or even years to pay back the debt (I know because I've been there).
Hell, our household income is nearly $70k and while we do have enough in savings to cover such an emergency, it would still be painful and it would take us months to recover the money. Thankfully we both work for local government and have decent dental coverage, but it's a far cry from the much better health insurance we enjoy.
Also, the idea that major dental surgery is "just" $3K is amusing. My bill for removing my wisdom teeth came to nearly $12K, of which my insurance paid all but $800 thankfully. That wasn't even the total cost either; I developed a severe infection and when I called my dental surgeon he told me to go to the emergency room (another $1200) to have it drained and get an antibiotic prescribed. The emergency room gave me the antibiotic but told me to go to the dental surgeon for anything else. It's a total clusterfuck.
Seriously? You could fly to Thailand or central Europe and get your dental work performed there for a fraction of the price. You could probably fly business class, stay at a swanky hotel, and absorb the loss of two weeks work and still come out ahead. I'm serious. Dental tourism is a thing.
I was an accidental dental tourist a few years ago while travelling around Europe. I had just arrived in Budapest, Hungary when a tooth I knew required root canal suddenly started hurting intensely. Wife found a local dentist, booked me in, the procedure was done over a couple of sessions and the total cost came in well under $1k AUD.
(Your bill seems excessive even by affluent Australian standards. I had four wisdom teeth removed – one of them impacted, requiring a dental surgeon – and the total cost was under $3k AUD at my local dentist. I bet it only "cost" $12k because it was covered by insurance rather than priced by the free market.)
It's expensive by US standards as well. In NYC, which is a high COL area, the price I've seen quoted is around $200-250 per tooth.
$12K must mean that they were complications that are being included - insurance will always be more expensive than a free market self-paying system, but not that much more.
Yeah, I'm quoting a lower end of the range, but the point is that OP was literally paying more than ten times that amount.
That doesn't change the nature of the problem.
With catastrophic events, one person in 250 will incur a million dollar expense in a given year, so everyone pays four thousand dollars a year for insurance and that person gets covered.
With dentistry, one person in five will incur a $3000 expense in a given year, so insurance would have to be $600/year. It's completely useless. If you couldn't afford the loan payment then you couldn't afford the insurance.
Insurance only works for things rare enough that most people in the pool will never incur the expense. If the event is common then it isn't insurance, it's just a prepayment plan.
Insurance never saves money, it only pools risk.
Insurance doesn't have to be for things where most people will never incur the expense. The average time between car accidents in the US, for example, is a bit over a decade, yet car insurance is very much a thing (and not just the legally mandated liability insurance, either).
I don't have the actual numbers, but even if they were once in ten or twenty years, nothing really changes.
> Insurance doesn't have to be for things where most people will never incur the expense. The average time between car accidents in the US, for example, is a bit over a decade, yet car insurance is very much a thing (and not just the legally mandated liability insurance, either).
That isn't the average time between major car accidents. Most accidents are little fender benders that often don't even reach the deductible. What comprehensive insurance is really for is when some drunk totals your car while there is still a five figure car note on it -- and having that insurance is required by the lender. Or for liability if you maim someone and owe a million dollars. But neither of those ever happen to most people.
You can save a bit of money on car insurance by having a $5000 deductible, because the average claim amount is <$3500 but you'll save more than the difference in insurance premiums over the years with the higher deductible.
I chipped a tooth on an olive pit.
$700 of dental work later, another $300 to get my nightguard remade (my bite changed a bit).
Another couple hundred to get that work fixed (the original filling had some issues), and a single olive pit cost me over 1k.
Dental bills add up fast.
Source: http://www.usatoday.com/story/money/personalfinance/2016/10/...
Preventative dental work is dirt cheap and corrective dental work is relatively rare, and costs rarely spiral out of control.
That sounds like a much better deal to me, as an insurer, than insuring any other body part.
When costs are easily predictable, that's actually a terrible case for an insurance model. Insurance is about smoothing risk, not making things cheaper. In fact, for services that are relatively cheap and predictable, insuring against those events will always be more expensive than paying for them out of pocket, because of the additional overhead.
Financially, the expected value of insurance is negative (the sum of all expected payouts is less than the sum of all future premiums). The reason it's valuable is because it reduces the variance in the month-to-month payments, which is a useful product for some people.
Sometimes extractions make sense in any case, but they're always going to be cheaper than multi-visit restorations of various sorts.
Fire-up Excel and develop a financial model for providing dental insurance to a million people.
On another tab, develop a financial model for providing mid-range health insurance to a million people.
Finally, develop a financial model for providing automobile insurance to a million people.
This will answer all your questions.
Probably as someone else mentioned, dental insurance is expensive because even though routine dental work is cheaper than getting cancer / breaking a bone, it happens 100% of the time.
You could start with expenses. I won't develop a comprehensive model here but here's a small list of what could cost an insurance company money.
- Average number of claims per client per year
- Average cost of claims
- Regulatory compliance costs
- Administration costs
- Structural costs (buildings, desks, computers, cars, phones, etc.)
- Cost of sales
- Personnel costs (salaries, health insurance, benefits, taxes, HR, etc.)
Next do income.
Simple version: How many clients? How much do they pay on average?
Complex: You need to divide clients into layers with different risk profiles. Each risk profile is likely to have to pay different premiums, etc. This connects with the cost side of the equation. I listed average cost of claims above, this isn't likely to be a realistic cost model. It might be OK for a quick first stab but you really need to model cost of claims in tiers with some relationship to statistical risk, etc. This requires some thought. Google, again, could be your friend here.
In some ways, to talk in programming terms, you almost want to create a class to represent an individual client (with all the relevant variables) and then instantiate a million of them by using realistic distribution criteria to decide how these variables, well, vary. For example: Out of a million people, in any given year: What's the likelihood of a non-fatal heart attack? What's the likelihood of broken bones? What's the likelihood of hospitalization? You then have to attach costs to these events.
You would then have to add a matrix of plans with different coverage structures, deductibles, etc. These plans will interact with the above to generate actual costs. Some people will have very low premiums but huge deductibles and light coverage. Others will opt for very higher premiums for more coverage and still have a deductibles structure. Google can provide ideas on what's out there.
This can get very, very complicated. The simple version can give someone a basic understanding of what's at play. Bottom line, there's a reason for which comprehensive dental insurance isn't commonplace and this kind of analysis reveals it.
To those of us used to the financial analysis of businesses the answer to this question is clear. I think it is important for people to try and understand how money works. A lot of the issues out there boil down to the masses not having this understanding. Every day politicians promise things that are firmly rooted in fantasy, a fantasy that is easily revealed with a quick dive into a spreadsheet. This is a huge problem.