Can Premium Subsidies Be Used to Pay for Dental Insurance?

Pediatric dental coverage is an essential health benefit under the Affordable Care Act. But can the ACA's premium subsidies be used to cover the cost of dental insurance? There are a lot of factors involved, so take a look at how it works.

Pediatric Dental Coverage: A Unique Essential Health Benefit

Under the Affordable Care Act, there are ten essential health benefits that all individual and small group health plans (with effective dates of January 2014 or later) are required to cover. Although the specifics of the coverage differ from one state to another, the basic coverage categories all have to be included. But one of the essential health benefits—pediatric dental—is treated differently.

Section 1302(b)(4)(F) of the Affordable Care Act clarifies that as long as at least one stand-alone pediatric dental plan is offered through the health insurance exchange in a given area, health plans that don't include pediatric dental coverage can be offered through the exchange.

So unlike all of the other essential health benefits—which must be integrated into all individual and small group health plans—the law clearly allows for pediatric dental coverage to be provided via a separate dental plan. (And this is in line with how most Americans receive dental coverage: Via an employer-sponsored plan that's separate from their health coverage.)

Given that provision, some health plans integrate pediatric dental with the rest of their coverage. But others opt not to since consumers have the option to purchase a separate stand-alone pediatric dental plan to go along with their health plan.

Pediatric dental care benefits can be very different depending on whether a family ends up with a health plan that has integrated pediatric dental coverage versus a health plan plus a separate pediatric dental plan.

When pediatric dental coverage is integrated with the health plan, a child's dental costs can be applied to one combined deductible that applies to all medical and dental costs (if the insurer chooses to design the plan that way). Total out-of-pocket costs—for dental care and medical care combined—can be as high as $8,700 in 2022, and as high as $9,100 in 2023.

And insurers that offer health plans with embedded pediatric dental coverage are not required to cover any of the pediatric dental services pre-deductible, including preventive care. Advocates have long pushed to change this rule.

But for the time being, insurers are allowed to count all pediatric dental services towards the combined medical/dental deductible. This is because most preventive pediatric dental services are not among the preventive care services that are required to be covered pre-deductible on all health plans (exceptions are fluoride treatments and oral health risk assessments, which are required to be covered pre-deductible).

But when a pediatric dental plan is sold on its own, as a stand-alone policy, the out-of-pocket costs can't exceed $375 for one child, or $750 if the family's plan covers two or more children. These amounts are subject to annual inflation adjustments, although they remained steady from 2015 through 2021. There was an adjustment in 2022, when the current limits were imposed. And the $375/$750 limits continue to be used for 2023.

These amounts are much lower than the combined medical/dental deductibles and out-of-pocket maximums that can apply when pediatric dental coverage is embedded in a health plan. But insurers have the flexibility to design those plans with more robust pre-deductible pediatric dental coverage, so there is a wide range of plan designs available. As is usually the case when it comes to health insurance, there's no one-size-fits-all approach.

Premium Subsidies and Pediatric Dental Coverage

But what about premium subsidies? The idea behind premium subsidies is for the subsidies to make the cost of coverage affordable, and that coverage is supposed to include the ten essential health benefits.

But premium subsidies are based on the cost of the benchmark health plan in each area (i.e., the second-lowest-cost silver plan), and as described above, sometimes those health plans don't include pediatric dental coverage.

Initially, there wasn't a way to address this problem. Subsidies were calculated based on the benchmark plan, which sometimes included integrated pediatric dental coverage and sometimes did not (more often than not, it didn't—unless a state required all health plans in the exchange to embed pediatric dental—because the benchmark plan is the second-lowest-cost silver plan in a given area, and plans with embedded pediatric dental coverage will tend to be among the more expensive options, rather than among the lowest).

But in late 2016, the IRS published a final rule that changed the way premium subsidies are calculated with regard to pediatric dental coverage. The rule took effect in 2019, and it changed how the benchmark plan price is calculated by the exchange (keeping in mind that this is the price on which an applicant's premium subsidy is based, regardless of which plan the family selects).

Under the new rule, the exchange essentially incorporates the cost of pediatric dental coverage when determining how much the benchmark plan would cost for a family's coverage. If all of the available silver plans include embedded pediatric dental coverage (as is the case in some states that require that approach), the plans can just be ordered from least to most expensive. The second-least-expensive one is the benchmark plan, and its premium is used to calculate the enrollee's premium subsidy.

But if one or more of the available silver plans do not include embedded pediatric dental coverage, the cost of dental coverage now has to be factored into the calculation.

To do this, the exchange looks at the available stand-alone dental plans and determines the portion of their premiums that's attributable to pediatric benefits (so if adults are also enrolling in the dental plan, their portion of the premium is not counted). The dental plan with the second-lowest premiums is selected, and that amount is added to the cost of the available silver plans that don't include embedded pediatric dental coverage.

From there, the exchange orders the silver plans from lowest to highest premium, with the cost for the stand-alone pediatric dental plan added to the premiums for any silver plans that don't include embedded pediatric dental coverage.

From that list, the second-lowest-cost plan (benchmark plan) is selected and its total premium is used to calculate the enrollee's subsidy. The benchmark plan may end up being a health plan that includes embedded pediatric dental coverage, or it may be a combination of a health plan and a stand-alone dental plan.

Summary

Pediatric dental is one of the ACA's essential health benefits. But unlike other essential health benefits, it can either be embedded in a health plan or sold as a stand-alone plan (usually by a separate insurer). Premium subsidies cannot be used to cover the cost of separate adult dental coverage, since that's not an essential health benefit.

But if some of the medical plans in a given area do not include embedded pediatric dental, the cost of stand-alone pediatric dental coverage is added to their premiums in order to determine the total premium for all essential health benefits. Then those amounts are ranked in order, and the family's subsidy amount is based on the second-lowest-cost total premium. this could be a plan with embedded pediatric dental, or it could also include the cost of a stand-alone dental plan.

This ensures that if the available plans do not have embedded pediatric dental coverage, the family will get an additional subsidy amount to offset some or all of the cost of a stand-alone pediatric dental plan.

A Word From Verywell

The exchange/marketplace will do all of these calculations for you. But if the available plans do not include embedded pediatric dental coverage, your premium subsidy may be larger to account for the additional cost of purchasing a separate dental plan for your kids.