Have you ever wondered what actually determines the rate and coverage of your group dental insurance plan? These 4 factors could have an influence:
- Location. When it comes to a geographical area, your dental insurance carrier considers competing companies, local regulation and cost of living—all of which can influence premium pricing. This is pretty standard in the insurance business—dental, medical, or otherwise. For example, if you’ve ever moved from one city or state to another, you may have noticed your car insurance premiums changed even though all other factors remained the same. With car insurance, your residence is used as a pricing factor. With dental insurance, carriers are more interested in where the majority of the company’s employees live. For example, you may live in Phoenix and work for a national company based in San Francisco. If there are 500 employees living in California, but only 50 in Arizona, the employees living in California will drive the overall rate more than those in Arizona.
- Group Size. The saying, “power in numbers” applies here, as larger companies may receive lower benefit rates than their smaller counterparts. That’s because when there are hundreds of employees paying into a group plan, a single claim doesn’t carry the same impact it would in a smaller group. In addition, administrative costs are generally lower on a per employee basis for larger group plans because the costs are spread over more people. For example, it may cost the carrier about the same amount to create a contract for a company with 50 employees or 200 employees. Assuming the fixed cost to create both contracts is the same, the rate for the employee at the larger company would be impacted less because those fixed administrative costs are shared among more people.
- Demographics. Oftentimes group rates are determined based on how many claims the insurance carrier is likely to receive. A younger, healthier workforce could see lower rates, as those employees may only need preventive services, such as routine cleanings, X-rays and the occasional filling. An older workforce may require more extensive dental care, such as crowns, root canals or dentures, and could be charged a higher rate.
- Employer Decision. When it comes down to it, your employer ultimately chooses your coverage specifics. It’s a delicate balance between providing a comprehensive dental plan with great benefits and keeping premiums affordable. And generally, the richer the plan design, the higher the rates. Speak with your HR department about any concerns you have regarding the services your plan does or doesn’t cover.
Now that you have a better understanding of how dental carriers determine insurance premiums, you may be wondering how to stretch your benefit dollars. If so, check out these posts about maximizing your coverage: