How to correctly calculate your dental patients’ out-of-pocket costs

Moving through the dental billing process is complicated, and your office’s success depends on your ability to do this well. In order to keep your patients happy with your dental care and your billing process, you need to properly calculate patients’ out-of-pocket costs. Giving patients the wrong number can hurt the good will and loyalty you want between you and your patients. Doing this right earns their trust with your expertise.

As a dental billing service helping improve billing processes and education on insurance, we’ve seen dental teams struggle to properly calculate patients’ out-of-pocket costs, leading to annoyed or even angry patients. When patients can’t trust your numbers, you can end up losing them, which also means losing revenue. 

A big reason dental front desk teams struggle with out-of-pocket costs is that insurance details make this task incredibly complicated. It’s hard to see when the information entered is incorrect or incomplete. It’s tempting to rely heavily on dental software to calculate the cost for you, but if the insurance factors aren’t set up right, the numbers coming out won’t be accurate either, even if the math is correct. 

In this article, you will learn how to calculate patients’ out-of-pocket costs yourself, and understand the “why” behind the calculation. That way when you’re entering numbers into your software to figure out the patient’s responsibility, you know what you’re doing. 

 A simple calculation of patients’ out-of-pocket cost (in-network)

Let’s start with a bare-bones example. This example will not include complicating factors such as deductibles or downgrades. 

Your patient comes into your dental office with their insurance. They are in need of one filling that costs $100. Their insurance covers 80% of their filling, so the patient is responsible for the other 20% of the cost. 

Insurance cost: 

$100 x 80% = $80

Patient responsibility: 

$100 - $80 = $20

Pretty easy, right? This isn’t typically a calculation that people get wrong, but it’s still important to understand the basics. 

Let’s include an insurance deductible in this scenario

A deductible is a set amount of money a patient pays out-of-pocket for dental expenses before coverage can apply from the plan’s benefits. Most plans include a yearly deductible per person and a family deductible. This is typically only applied to basic or major procedures. It rarely applies to preventative care such as cleanings, evaluations, x-rays, or fluoride treatments. 

So, let’s apply a deductible to the same scenario. Your patient needs a $100 filling and the plan covers 80% of the cost after the patient has paid $50 out of pocket to meet the deductible. The first thing that insurance does is apply the $50 deductible to the $100 filling, and then cover 80% of the remaining cost.  This means the plan actually covers 80% of $50. 

Some people think that the deductible applies after the full price minus the percent the plan pays. But here’s the problem: They’ve applied the coverage to the full cost before the deductible. They’ve calculated 80% of $100 first. This is inaccurate! Insurance will cover 80% of $50 because the patient has to pay a $50 deductible first. That's how a deductible is actually calculated. 

Insurance cost: 

$100 - $50 (deductible) = $50

$50 x 80% = $40

Patient responsibility: 

$100 - $40 = $60

If you’re working in billing, you already know the deductible must be satisfied. It can be a little complicated to calculate, but if you accurately enter the patient’s insurance information into your software, it should be no problem. It’s still important to understand how the cost estimate was calculated, though. 

This way you can properly explain to your patient why the amount they’re responsible for is correct.

Let’s include a downgraded procedure into this scenario

Here is another wrench in the process of calculating patients’ out-of-pocket: downgrades. Insurance loves to make things complicated! 

So let’s apply a downgrade to our example. Let’s say the policy allows insurance to downgrade their payment based on a less expensive procedure that was an option other than the filling used.

This is common and occurs with most dental plans today. In these cases, although a composite (white color) filling was performed on the patient, the insurance actually determines their benefit based on the lower fee of the downgraded amalgam (silver color) filling.

Even though the doctor performed the $100 composite filling, the fee associated with the amalgam filling is $70. So in this case, the same patient’s insurance will pay 80% of the downgraded procedure, or 80% of the $70 amalgam. 

Insurance cost: $70 x 80% = $56 

Patient responsibility: $100 - $56 = $44

Again, there is an option in your software to apply downgrades to certain procedures. This should properly calculate the patient’s responsibility for you. The trouble is, it’s very common for front desk team members to misunderstand how to calculate the patient’s bill when downgraded fees apply. 

You may find the difference between your fee and the downgrade ends up being written off instead of collected from the patient. This is a money-losing mistake, and you can avoid it by ensuring everyone has access to the proper information and training about how to correctly calculate costs - including downgrades. This also empowers your team to give your patients accurate information before the procedure. 

Pro tip: The patient is always responsible for the difference in the actual procedure performed and downgrade on restorative procedures. 

In addition to fillings, procedures for crowns are also often downgraded. Insurance companies consider options like a composite filling to be cosmetic in nature, and the “choice” of the patient. Basically, if the insurance argues that a less expensive option would have sufficed, that is what they’ll use to lower the amount they pay you, increasing the patient’s amount accordingly. 

Understand insurance calculations so you can explain them to patients

The biggest takeaway from these examples is to be informed about how insurance coverage details will impact your patient’s bill. Understand how your software applies these factors. You can’t reliably calculate patients’ out-of-pocket in your head without the help of your software. 

You should have a basic understanding of how the software determines your patients’ costs so that you can verify that they are correct, but here is the real takeaway: Know how to be sure you’re communicating accurate costs to patients. 

If you can clearly explain the math behind how their insurance coverage works, how downgrades will affect their portion of the cost, and how they should divide up their visits, you will have more grateful patients and less awkward back-and-forth about money. 

Avoid the 5 billing reasons your patients would leave your dental practice by visiting our Learning Center.

No one loves talking about money (or in this case, asking for it), but your dental practice is a place of business. It’s an exchange of services for money, and truly, the patient should be educated on the realistic cost of your services. Patients should also understand their own insurance plans, but unfortunately, that responsibility typically falls on the dental team’s shoulders.

Ready for a more efficient billing process where neither you nor the patient is frustrated? 

When you are clear with patients on topics such as insurance billing and how to calculate out-of-pocket costs, you will build trust between you and your patients. If you get this calculation wrong or enter it incorrectly into the software, you risk either charging your patient too little or too much. Errors are not only annoying but can be a source of contention with patients and lost income for your practice.

Build great relationships with your patients through proper billing calculations and clear communication about procedures and costs. Dental ClaimSupport can help you understand all of these insurance complexities through our educational platform, Dental Claims Academy. 

Never doubt your insurance knowledge again. Feel empowered to communicate insurance plans to patients in order to collect what you’ve earned by enrolling in Dental Claims Academy courses.