Is outsourced billing right for me if my dental practice collects under $40,000 in insurance per month?

Your dental practice brings in less than $40,000 in insurance per month. Your insurance revenue plus your patient revenue is covering your payroll, your rent, or your mortgage on your space, utilities, new equipment: your usual expenses and maybe some unexpected ones. 

You’re covering all of this and may be wondering, “Do I really have the budget to pay for a dental billing company to handle my insurance billing?”

The answer is yes. We’ve worked with all sizes of dental practices bringing in less than $40,000 per month, and we find that adding a dental billing company to your regular monthly expenses is not only less expensive than hiring an insurance coordinator, but also can help you bring in more money.

In this article, we will break down how a practice bringing in less than $40k per month in insurance payments can save money through hiring an outsourced dental billing company to help them bring in more money and create a more streamlined billing process.

How much does it cost to hire a dental insurance coordinator in-house?

To compare your options for insurance billing at your practice, it’s first important to know what an insurance coordinator would cost you. An average dental office insurance coordinator makes $18.26 per hour, bare-bones. If you want to include benefits and factor in more experience, it’s even more. We will discuss this more in-depth later in the article. Depending on your geographical location, this average could be even higher.

Let’s say your dental practice’s monthly revenue is $39,999. You’re looking to hire an insurance coordinator and want to pay them $23 per hour. Assuming they’re working around 40 hours a week, their pay per week is going to be $920. 

$18.26 x 40 hours per  = $730.40 every week. 

So if there are an average of 4.3 weeks in a month, or 173 hours working hours per month, they are going to be paid $3,159 per month (pre-taxes). 

$18.26 per week x 173 average hours per month  = $3,159 monthly. 

An in-house insurance coordinator’s annual salary ends up being approximately $38,000 (pre-taxes). 

$18.26 x 2080 average hours per year  = $37,980.80 annually.

How does an in-house dental biller compare to outsourcing costs?

Let’s compare these costs to what it would cost to hire an outsourced dental billing company. Most dental billing companies will charge a practice based on their monthly collections and the size of their practice. 

Since you’re a practice that brings in insurance revenue less than $40,000 per month, you’re looking at a fixed rate of around $1,250-1,899 per month for an outsourced dental billing company. If you were collecting over $40,000 per month, the flat rate would change to a percentage of collections.

If we want to compare apples to apples for an hourly rate of an in-house insurance coordinator versus outsourcing, let’s do the math. 

With an outsourced rate of $1,300 per month, we have determined an hourly rate of $7.51. The in-house insurance coordinator was $18.26 per hour above. 

$1,300 / 173 average working hours per month = $7.51 per hour 

If you’re paying your dental billing company $1,300 monthly, that means you’re paying around $300 per week for your service. The in-house insurance coordinator was $730 per week in the example above.

$7.51 x 40 hours per week  = $300 every week. 

Comparing the in-house coordinator to the outsourced service monthly, let’s multiple the hourly rate times the average hours per month.  Keep in mind, the in-house insurance coordinator’s monthly fee is $3,159.

$7.51 per hour x 173 average hours per month  = $1,300 monthly. 

Annually, you would be paying an outsourced dental billing company about $15,600.  

$1,300 x 12 months in a year = $15,600 annually. 

Let’s look at that annual difference. An insurance coordinator is going to cost you about $38,000 per year pre-taxed (and no benefits included), and an outsourced dental billing company is going to cost around $15,600 per year. 

$38,000 insurance coordinator salary - $15,600 outsourced dental billing fee = $22,400 

difference

In the argument of hiring an in-house insurance coordinator at a rate of $18.26 (pre-taxed with no benefits included), you could hire an outsourced dental billing company and save over $22k per year. 

What other fees does a W2 employee cost an employer?

In the article, “How much does an employee cost?” written by Joe Hadzima, a Senior Lecturer at MIT Sloan School of Management, Joe explains the employment costs into several broad categories, such as:

• Basic Salary plus:
• Recruiting Expenses
• Employment Taxes
• Benefits
• Space
• Other Equipment

The article points out that costs of basic salary, employment taxes, and benefits are “typically in the 1.25 to 1.4 times base salary range - the cost range for a $50,000/year employee might cost $62,500-$70,000”

Within the laws of FICA (Federal Insurance Contributions Act), is Social Security and a Medicare tax. Employers and employees each pay a 6.2% payroll fee for Social Security and a 1.45% Medicare tax. Additionally, the FUTA (Federal Unemployment Tax Act) tax rate of 6% is applied to the first $7,000 earned by the employee each calendar year.

While the FICA and FUTA taxes are mandatory, offering employee benefits are voluntary.  Employers often add a benefits package to an employee’s wage for attraction and retention and also to provide their employees with health insurance and retirement planning.

Benefits offered to employees consist of health insurance, dental insurance, vision insurance, LTD (Long Term Disability), STD (Short Term Disability), and 401k matching.

How much does an in-house insurance coordinator cost a dentist with the taxes and benefits included?

Let’s take the information we just learned above and make a calculation below. We need to multiply the annual salary of an in-house insurance coordinator times the costs range of 1.25 and 1.4.

With the average insurance coordinator hourly rate $18.26, or $38,000 annually, let’s do the math:

1.25 (Low end tax and benefits range): $38,000 annual salary x 1.25 costs = $47,500 annual expense

1.4 (Higher end tax and benefits range): $38,000 annual salary x 1.4 costs = $53,200 annual expense 

What this means: With your office collecting less than $40,000 per month in insurance, hiring an insurance coordinator to handle your dental billing in-house is not going to be cost-effective.  You could save over $30,000 per year by outsourcing your insurance claims to an outsourced dental billing company.

What happens if my dental practice starts collecting more than $40,000 per month in insurance?

For most dental practices, there is fluctuation month to month that could occasionally surpass the $40,000 insurance collection amount. Fluctuations can occur due to some of the following factors:

• Higher case acceptance
• Associates being hired or filling in
• Hygiene production 
• Longer month

In the case that your insurance collections do break $40,000, your outsourced dental billing fee would change. In most cases, you are going to be charged a percentage, typically 3.5% of the insurance collected amount.  

For example, if you collected $45,000 from insurance, your fee would be $1,575 that month instead of the $1,300.

$45,000 insurance collections x 3.5% Tier 1 percentage = $1,575 monthly fee 

By comparison, the in-house insurance coordinator monthly was around $3,159 monthly, or $1,584 higher per month than the outsourced fee.

Do you think outsourcing your dental insurance billing is right for you?

It feels hard to factor outside costs into your monthly expenses that you weren’t sure you needed. You do, however, NEED to have someone accountable for your dental insurance billing. 

Every dental practice’s collections are different, which is why many companies have tiers of prices for their services. With our services at Dental ClaimSupport, if you’re making under 40k per month, you can receive the following services for as low as $1,300 per month:

1. Post all insurance payments
2. Maintain weekly insurance aging report
3. Handle all appeals and denials

Learn more about the cost of outsourcing your dental insurance billing by diving into our article, How much does outsourced dental billing cost?