Why do group dental plans often place limits on annual benefits?

Group dental plans often impose limits on annual benefits primarily to minimize adverse selection. Adverse selection occurs when individuals with a higher risk of needing dental care are more likely to enroll in a plan compared to healthier individuals. By capping benefits, insurance providers can maintain a balance in the risk pool. This capping discourages the enrollment of only those who anticipate high dental costs, helping ensure that the risk is spread more evenly among all participants and allowing the insurance to remain financially viable.

Setting limits also encourages members to utilize preventive care services instead of waiting until issues arise, which can save costs for both the insured and the insurer. However, the primary reason for these limits is to mitigate the financial risks associated with adverse selection, maintaining the plan's sustainability over time.