- 11,997
Senior dental is like maternity coverage and they both have roughly the same problem: The only people that want it are usually the people that need it.
Dental insurance just doesn't work. The problem is exactly what we have here: Some wants an expensive service, but they want to pay the premium instead of paying the office charge. Insurance 101: Insurance works by spreading the financial risk over a large group of homogenous risk. If it's not all the same type of risk, then it doesn't work. The reason life insurance works, especially term, is because most people are going to pay into the system and relatively few are going to use it, particularly at any given moment.
For example:
1,000 thirty somethings each through 1,000 in a pot and agree that when the first one of them dies that, that person's family will get the money. Actuaries say that one, but only one of them will die. So a year goes by and the actuaries were right, one dies. The insurance carrier takes out $100,000 for operating expenses, puts another $100k in reserves, and then the persons family ended up with $800k of death benefit. Of course those aren't all the considerations and the numbers aren't all exact, but you get the rough idea.
Let's take a look at senior dental. If you get 1,000 seniors together and they all put in $500 for the year so now we have $500,000 which sounds like a lot, but here is why it isn't: 10% of that was agents commission, so now we're down to $450k. We also have operating expenses like marketing materials, state licenses, customer service, agent support,so now we're down to let's say $250k. Now we've cut those premiums in half and we need to use that to pay claims. The huge problem we now have is that some seniors want work done, others don't, but on the average each member/seniors/customer is looking to have at least $1k worth of work done and we only have $250/member.
The problem with senior dental is there are just too many claims and not enough premium payers.
In the last 17 years Frank has not been able to find a good senior dental plan and even if he were to live 170 years more (which I think would be AWESOME!) he never will see one because the math just does not work.
Dental insurance just doesn't work. The problem is exactly what we have here: Some wants an expensive service, but they want to pay the premium instead of paying the office charge. Insurance 101: Insurance works by spreading the financial risk over a large group of homogenous risk. If it's not all the same type of risk, then it doesn't work. The reason life insurance works, especially term, is because most people are going to pay into the system and relatively few are going to use it, particularly at any given moment.
For example:
1,000 thirty somethings each through 1,000 in a pot and agree that when the first one of them dies that, that person's family will get the money. Actuaries say that one, but only one of them will die. So a year goes by and the actuaries were right, one dies. The insurance carrier takes out $100,000 for operating expenses, puts another $100k in reserves, and then the persons family ended up with $800k of death benefit. Of course those aren't all the considerations and the numbers aren't all exact, but you get the rough idea.
Let's take a look at senior dental. If you get 1,000 seniors together and they all put in $500 for the year so now we have $500,000 which sounds like a lot, but here is why it isn't: 10% of that was agents commission, so now we're down to $450k. We also have operating expenses like marketing materials, state licenses, customer service, agent support,so now we're down to let's say $250k. Now we've cut those premiums in half and we need to use that to pay claims. The huge problem we now have is that some seniors want work done, others don't, but on the average each member/seniors/customer is looking to have at least $1k worth of work done and we only have $250/member.
The problem with senior dental is there are just too many claims and not enough premium payers.
In the last 17 years Frank has not been able to find a good senior dental plan and even if he were to live 170 years more (which I think would be AWESOME!) he never will see one because the math just does not work.
