Eligibility | Contractual Provisions

In contributory plans, most employers use the same eligibility requirements for dental coverage as they use for medical expense coverage. However, some employers have different probationary periods for the two coverages. Probationary periods are used because members of a group who previously had no dental insurance usually have a large number of untreated dental problems. In addition, because many dental care expenditures are postponable, an employee who anticipates coverage under a dental plan in the future is inclined to postpone treatment that is not crucial. Depending on the group's characteristics, the number of first-year claims for a new plan or for new employees and their dependents under an existing dental plan can be expected to run between 20 percent and 50 percent more than long-run annual claims. Therefore, to counter this higher-than-average number of claims, some employers use a longer probationary period for dental benefits than for medical expense benefits. Other employers may have the same probationary period for both types of coverage but will impose waiting periods before certain types of dental expenses will be covered (such as 12 months for orthodontics).

Longer-than-usual probationary periods or waiting periods initially minimize claims, but unless an organization has a high turnover rate, the result may be false economy. Many persons who do not have coverage merely postpone treatment until they do have coverage. This postponement may actually lead to increased claims, because existing dental conditions only become more severe and then require more expensive treatment. For this reason, some benefit consultants feel that dental plans should at most contain relatively short probationary and waiting periods.

Another method of countering high first-year claims is to require evidence of insurability. For example, an insurance company might require any person who desires coverage from the dental plan to undergo a dental examination. If major dental problems are disclosed, the person must have them corrected before insurance coverage becomes effective.

Because dental expenditures are postponable and somewhat predictable, the problem of adverse selection under contributory plans is more severe for dental insurance than for many other types of group insurance. To counter this adverse selection, insurance companies impose more stringent underwriting (including eligibility) requirements on contributory dental plans than they do on other types of group insurance. In addition, most insurance companies insist on a high percentage of participation (such as 80 percent or 85 percent), and a few will not write contributory coverage. Many insurance companies also insist on having other business besides dental coverage from the employer.

The problem of adverse selection is particularly severe when persons desire coverage after the date on which they were initially eligible to participate. These persons most likely want coverage because they or someone in their family needs dental treatment. Dental insurance contracts contain several provisions that try to minimize this problem, including one or a combination of the following:

• Reducing benefits (usually by 50 percent) for a period of time (such as one year) following the late enrollment.

• Reducing the maximum benefit to a low amount (such as $100 or $200) for the year following the late enrollment.

• Excluding some benefits for a certain period (such as one or two years) following the late enrollment period. This exclusion may apply to all dental expenses except those that result from an accident, or it may apply only to a limited array of benefits (such as orthodontics and prosthetics).