To control rising premiums for dental benefits, employers have looked for ways to share costs with their employees. One way of sharing costs, is to require employees to contribute towards the cost of their coverage.
When the cost is shared by both the employer and the employee, the cost of the plan to the employer will be greatly reduced. Two ways that the cost of the plan can be shared between the employer and the employees are through premium contributions and through co-payments, co-insurance, deductibles and annual maximums.
Insurance premiums are determined by the insurance company and often regulated by the state. Usually insurance premiums are billed and paid on a monthly basis. Employers may require employees to share the cost of the plan premium. The employer will pay a portion of the premium and the employees may set aside pre-tax money to pay for the remaining premium through payroll deductions.
A dental plan can also be a voluntary plan sponsored by the employer, but with the premiums paid 100% by the employee through payroll deductions.
Any payment made by employees for their coverage in a self-insured dental plan can still be handled through payroll deductions. Instead of being sent to an insurance company for premiums, the contributions are confined by the plan until claims are paid, or put in a trust that is allocated by the plan.
Co-payments, Co-insurance and Deductibles:
A co-payment, or "co-pay" as it is sometimes called, is a flat fee that the patient pays at the time of service. The fee is usually small. Co-payments are common in capitation plans, e.g. dental health maintenance organization (DHMO) plans, and in preferred provider organization plans (PPOs).
In many plans, patients must pay a portion of the services they receive. This payment is called "co-insurance" and is usually a percentage of the service cost after the plan pays benefits. For example, if the plan pays 80 percent of the cost, the patient pays 20 percent of the cost. If the plan pays 50 percent, the patient pays 50 percent, and so forth. Co-insurance is common for PPO products and less common in DHMOs.
A deductible is a flat amount that the employee must pay before they are eligible for certain benefits. The deductible may be an annual or a one-time charge.
Generally, the greater the co-payment, co-insurance and deductibles are, the lower the premiums will be.