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Consumers lose if dental loss ratio legislation wins

Health Payer Specialist

Daniel Croley, DMD, Chief Dental Officer at Delta Dental of California, argues against a minimum loss ratio in the industry.

Organized dentistry in several U.S. states recently proposed legislation that would push the cost of dental benefits out of reach for millions of Americans. Fortunately, state legislatures so far are not buying this ill-conceived idea to impose what’s called a “minimum loss ratio” on dental insurance policies.

In a win for residents of Arizona, California, Montana, Nevada, New Hampshire, New Mexico and West Virginia, lawmakers are sensibly tabling such legislation, or endorsing a compromise “reporting only” alternative. Here’s why:

First introduced for medical carriers when Congress passed the Affordable Care Act in 2010, the idea of medical loss ratios for dental might sound good at first. If it’s good for medical, why not dental? The concept of minimum medical loss ratios was intended to regulate the percentage of a premium that an insurance carrier can spend on administration and profit versus patient care. Who doesn’t want a larger portion of premiums to go toward care rather than profit and administration?

But a deeper look reveals minimum loss ratios for dental are counterproductive.

Medical and dental are different

With premiums as low as 1/20th the average medical plan, dental plans have all the same administrative and regulatory requirements as medical plans. Congress introduced loss ratio thresholds to medical care under the ACA because it committed hundreds of millions of taxpayer dollars to help Americans afford medical insurance. Congress explicitly exempted dental plans from these requirements because it neither subsidized nor standardized adult dental plans.

No evidence of excess profits

With medical plans, the idea was to ensure taxpayer dollars were being used to buy care, not create excessive profits. Dental plans receive no taxpayer dollars and did not significantly increase enrollment as a result of the ACA. The average dental insurer earns just two to three cents on every premium dollar charge, which is a significantly smaller margin than most businesses.

Dental plans provide tremendous value

Meanwhile, the return to dental plan enrollees with dental insurance is significant. Individuals with dental insurance are more than twice as likely to visit a dentist at least once in a year, pay consistently less out of pocket for care, and experience decidedly fewer oral health issues over time. This spares many of the long-term negative health outcomes associated with poor oral health.

Why loss ratios would lead to higher dental premiums

Imposing “loss ratio” legislation on dental insurers will directly result in increased premiums, meaning the only thing it reins in are the services dental insurance plans provide that deliver the care and services Americans need.

When something seems too simple, it often is. A recent independent actuarial analysis looking at the potential impacts of dental loss ratios in Massachusetts suggested they could have the following unintended impacts:

  • Increase most small group and individual dental premiums between 38% and 60%, making dental insurance less affordable and leading individuals and employers to drop their current dental policies
  • Push more businesses to self-insure, removing their dental benefits from state regulatory oversight
  • Result in a market consolidation among dental plans, thus reducing consumer choice and options to purchase dental insurance

To raise a loss ratio from a lower to higher number, a dental plan can only do one of three things: increase fees paid to dentists above market rates, reduce services and the quality programs it provides to patients and dentists, or increase total outlays for benefits, above and beyond what dental benefit purchasers are asking for.

All three can only be paid for in the form of higher dental premiums.

This year the National Coalition of Insurance Legislators will review a proposal by the American Dental Association to establish a dental loss ratio model act. Such acts often serve as a starting point for other states to adopt the model.

Not every lawmaker participates in NCOIL, but if yours does, please explain to them that you are not interested in paying more for dental insurance or losing your current policy because your employer can no longer afford it.

Daniel Croley, DMD, is vice president and chief dental officer at Delta Dental of California

(This op-ed appeared in Health Payer Specialist on April 17, 2023).