I was going through my extensive teeth brushing routine the other day and I started thinking about our dental premiums. I am talking about the dental premiums I kept in my pocket by not paying them. Sometimes a little extra flossing and risk management can save some serious money. Just because an employer offers us a benefit doesn’t mean we always have to say yes.
Oh, and don’t forget the mouth wash.
Mrs. Max OOP and I used to regularly go to the dentist when we were down South. Although I’ve had a few minor things come up over the years, Mrs. Max OOP always seems to get a clean bill of dental health. In fact, our dentist down South used to go out of his way to tell her how healthy and beautiful her teeth were. After a few years of this, I started to wonder why we were paying so much for this guy to say hi and tell us how healthy her teeth were?
So, I made the decision to take her off the insurance in 2019. And no, it wasn’t because I was getting jealous of our dentist. We already moved to New England by 2019 which solved our friendly dentist problems. Just joking; he was a great dentist.
Why did I strike Mrs. Max OOP from the insurance while selfishly keeping myself on the plan? Two reasons. Price and risk.
Before we talk about price and risk, we need to talk about the plan. It wouldn’t make sense to give up something without fully understanding what it has to offer. We are both eligible for the following if we sign up for my dental benefits.
My employer plan offers two 100% covered cleanings per year that include x-rays. This includes an oral exam by the dentist. It also provides us protection from basic services like fillings and root canals by covering up to 80% of the costs for these services. It provided additional protection for major services like crowns and implants by covering 50% of the cost for those services. There is an annual coverage maximum though; they won’t cover any more than $1600 per covered person per year (basic and major combined). I like this plan already, simple to understand.
So, as a couple that’s four cleanings per year, and $3,200 in coverage/insurance protection in the event of an unfortunate dental event like a root canal.
I get paid over 26 pay-periods. My individual premium cost for dental insurance for just me comes in at only $8.39 per pay period. Extrapolate that out over 26 pay-periods we get $218.14 in out-of-pocket premiums for 2019. Not a bad deal for a pretty solid insurance plan that includes free cleanings and $1,600 in protection from an unfortunate dental situation. This $218.14 comes out of my pocket, but my employer is also paying part of the premium behind the scenes.
$8.39 premium X 26 = $218.14 for 2019
When we pull Mrs. Max OOP into the equation the premium cost triples to $25.17 per pay period to cover both of us. This comes out to $436.80 more just to cover her. Evidently, my employer is happy to cover me for the $8.39 out-of-pocket premiums per pay period, but they want twice that for Mrs. Max OOP.
$25.17 X 26 = $654.42 for family coverage in 2019
Usually, when expenses break the $500-mark, Max OOP starts taking notice.
Although Mrs. Max OOP is Canadian, she doesn’t actually play hockey. In fact, we have never even made an NHL game together. With that and the fact that her dentist as never found an issue over years of cleaning, we went ahead and declared her a low-risk dental patient. Therefore, we decided to forgo the $1,600 in protection and two free cleanings per year and put $306.92 back in our pocket. We are choosing to self-insure Mrs. Max OOP.
My dental risk profile is a bit different. With the exception (or should I say extraction) of my wisdom teeth, I still have all 28 of my original teeth. But I have seen a few things come up over the years and my family history suggests I might be prone to dental issues as I age. My dad has had countless bridges, root canals, and crowns and those can really add up quickly. Therefore, it is important that I get
preventative preventive cleanings but also have a dentist monitor how things are going. Since I am a higher risk dental patient, I am happy to pay $218.14 in 2019 for $1,600 in protection from an unfortunate dental event. I might not need the $1600 in any given year, but at least it is there. The two free cleanings are just a bonus.
This is where all our hard work from the last few months will start to pay off and prevent us from making a decision without understanding all of the moving parts. We needed to do some math before we boot Mrs. Max OOP off the insurance.
At first glance at the title of this post, it might look like I am terrible at math and really saving $436.28 on this mastermind strategic decision. When you subtract the dental premiums to cover both of us from the premiums to cover just me, the total savings is $436.28.
$654.42 (both of us) – $218.14 (just me) = $436.28
You might remember our trip through the cafeteria to buy healthcare insurance. If we use our income to purchase health coverage through our employer’s cafeteria plan, that income is sheltered from FICA and federal taxes. In this case, since we are opting out, this $436.28 is now subject to all three federal income taxes; Medicare FICA (1.45%), Social Security FICA (6.2%), and regular federal income taxes. When we were busting tax brackets a few weeks ago we found out Max OOP lands in the 22% tax bracket. Since I am adding $426.28 back into this bucket it is now subject to the 22% tax.
$436.28 X 1.45% = $6.33 Medicare Tax
$436.28 X 6.2% = $27.05 Social Security Tax
$436.28 X 22% = $95.98 Federal Income Tax
Once we subtract all this tax from our newfound $436.28 in income, we only end up with $306.92 back in our pocket. Still not too shabby. What will I do with all this cash?
I generally follow pretty frugal ways, but sometimes you have to make exceptions. I spent $48.06 on some new fancy name brand dental supplies to get us through the last stretch of 2019 and provide some dental motivation. Over 50% of that expense went to the unnecessary Crest Whitestrips ($24.88), but I just couldn’t help myself. The floss should last through 2020. The reach floss was only $0.97, but I had to spring $5.77 for the Glide brand as well to see how much better it really is. None of these brands are sponsors of the blog at this point, but I welcome offers.
Is Max OOP Really Telling Everyone To Go Without Dental Insurance?
There is always one drunkard in the crowd, so let me spell this out.
No. That would be irresponsible.
You are responsible for your own risk/reward decisions. My main point here is to think about it before automatically signing up for all the benefits an employer has to offer. Could Mrs. Max OOP trip on our next hike and chip a tooth? Absolutely. But not only have we thought about it, we could also easily pay whatever it costs to fix it. Her teeth are self-insured. If her insurance came in a bit cheaper, we might consider insuring again. We could also hedge our bets and consider insuring her every other year and still check in on her teeth, only less frequently.
A small decision like this can add up over the years. Ten years without dental premiums for either of us could mean almost $4600 for the Max Out of Pocket crew, without even considering inflation. If we invest it in medical office buildings with a 5.5% yield, there is a pretty good chance it would be worth closer to $6,000 after 10 years. It is also worth knowing what tax bracket we are in to help understand our true savings. This same decision is worth about $50 more per year to someone in the 10% tax bracket compared to someone like me in the 22% tax bracket.
For someone in their 20s with young healthy teeth and aspirations to spend less, save more, and invest the difference, this analysis could be a great option to accelerate that process. Could even work for someone in their 50s with the correct risk profile. Of course, that is assuming that a twenty or even fifty-something understands the risk, and takes the time to floss.
Max Out of Pocket for our dental insurance in 2019? $218.14 to insure just Max.