Dental insurance is proof insurance does not always make sense……………
Insuring a benefit that pays no more than $1,000 per year is crazy. Let’s see where the money goes:
Reserves – Required totaling about 18-22%. These are monies to pay for claims incurred while you were covered but paid after you terminate coverage
Agent Commissions – Typical group dental commissions are 10-15%. In the case above, commissions are 29% to the writing agent and another 5% to the wholesaler
Retention – Company profit margin of 5%
Claims – Money left over after expenses = (+) (-) 50%
The reason people buy dental insurance is because they live paycheck to paycheck and couldn’t come up with a spare $1,000 if their life depended upon it. Instead, they pre-finance for a service they may or may not use through usurious rates that would make loan sharks blush with envy.
More employers are finding a common sense method of financing employee benefits. Employer sponsored Rainy Day Fund provides employees a benefit only when they need it.
For example, Joe Sixpack’s transmission goes out. Kaput. He doesn’t have the $1,500 to get it fixed. He has no way to get to work. No worries, the Rainy Day Fund to the rescue! Mary Jane needs a crown. HR gives her great news, the Rainy Day Fund to the rescue.
It kills us when an employer says “We only want the best for our employees!” Yet their actions prove they don’t.
