Insurance folks routinely using terms like “premiums,”“deductibles,” “coinsurance” and “annual maximums” sometimes forget how busy people are. Mommies balancing binkies and babies and young parents doing diapers and Dora the Explorer probably don't have time to learn insurance-speak as a second language.
Of course, every industry has its jargon. Retailers use terms like “end cap” and “early bird,” beauticians say things like “waxing” and “threading” and rappers rhyme words I have no idea what they mean so I guess it’s all relative.
Annual maximum (or annual max) is one term used by certain types of dental insurance plans, specifically preferred provider organizations or indemnity plans. The annual maximum does not refer to the most that a member pays out of pocket, but rather the maximum that the insurance plan will pay for dental treatment per year. (Note: a “year” can be based on the anniversary date when you joined your plan, or the calendar year, depending on the insurance company.) After the 12-month period is over, the plan will pay the full annual maximum again.
Here’s a quick example: Let’s say you have a plan with an annual maximum of $750. Your dentist says you need a crown that will cost $800. According to your plan benefits your share of the cost is 50%, so you'll pay $400 and your plan will pay the other $400. Because your plan has paid $400 toward your dental expenses so far for the year, subtracting that from the $750 maximum means the plan will contribute no more than $350 toward any future eligible dental costs for the remaining part of that 12-month period.
Annual maximums vary by insurance plan, but typically they range between $750 and $1,500. Remember that annual maximums do not normally include preventive care. Most dental plans pay all or most of the costs of preventive procedures so those don’t count against your annual maximum.
Where an annual maximum becomes a problem is when you need a lot of dental work done within a 12-month period.
For instance, let’s follow up on the earlier example that included an annual maximum of $750. Let’s say that six months after getting your crown you need another expensive procedure that will cost $900. According to the plan, your share should be 50% again, or $450, and the plan’s share should be $450. But because the plan has already paid $400 toward the annual maximum of $750 that means the plan is now only responsible for $350 during the remainder of that 12-month period. That means you will need to pay another $100, or a total of $550, for the $900 dental procedure.
Just remember that whatever amount the annual maximum is, it will normally buy you a lot of dental care. If you normally have one major procedure done a year it should fall under that annual maximum amount.
If you think you may need some expensive treatment(s) or if you just like the extra security, you may want to consider a plan with a higher annual maximum, or a dental plan that has no annual maximum like a Dental Health Maintenance Organization (DHMO) or a discount dental plan.
Congratulations! You now know what an annual maximum is and whether you need to consider a plan with a higher (or even no annual limit) or a less expensive plan with a lower annual maximum.
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