Should dental insurance have mandated medical loss ratios?

2017 01 30 16 27 12 733 Affordable Care Act Aca 400

The Patient Protection and Affordable Care Act (ACA) requires that health insurance plans spend a certain amount of premium dollars on medical care and quality improvement, known as a minimum medical loss ratio (MLR), but this hasn't been mandated for most dental plans. However, a new study looked at such ratios for California dental plans and found that many consumers may not be receiving a good value for their premium dollars

California began requiring dental plans to report medical loss ratios in 2014, and researchers analyzed the data for 2014 and 2015. They found that, while many Californians were in large-group plans that achieved high MLRs, millions were in other plans with relatively low ratios (Health Affairs, September 2018, Vol. 37:9, pp. 1517-1523).

"A legislatively mandated MLR could offer a remedy and ensure better value for dental products," lead study author Len Finocchio, DrPH, MPH, told

Dr. Finocchio is a principal consultant at Blue Sky Consulting Group in Oakland, CA, and study co-author Katrina Connolly, PhD, is a senior consultant for the firm.

Assessing value

Large-group health insurance plans are required to spend at least 85% of premium dollars on health services and quality improvement, and small-group plans must spend 80% under the ACA.

Medicaid dental plans in several states already have requirements for medical loss ratios, while discussion continues in various states about requiring these ratios for dental plans, the authors noted. A bill being considered in the California Legislature, SB 1008, would strengthen and standardize reporting requirements for dental plans and products, but proposed minimum MLRs were previously removed from it.

“A legislatively mandated MLR could offer a remedy and ensure better value for dental products.”
— Len Finocchio, DrPH, MPH

The California Dental Association asked the authors of the Health Affairs study to examine the MLR data that dental plans have been mandated to report. Their analysis did not include plans exempt from California MLR reporting, including discount plans, California Medicaid plans, disability insurance, and dental plans that are self-funded or governed by the Employee Retirement Income Security Act of 1974.

The researchers assessed variables, including the extent to which plans reached three types of thresholds: ACA large-group and small-group product thresholds, levels that were proposed in the California Legislature (75% for large-group products and 70% for individual and small-group products), and guidelines of the National Association of Insurance Commissioners (NAIC) of 60%.

They found that the California dental insurance market changed little during the study period between 2014 and 2015, with eight more plans being offered in 2015 and covered lives dropping less than 1% from 9.87 million in 2014 to 9.78 million in 2015.

The mean medical loss ratio over the two years varied from 4% to 126%, with a mean of 61%. When weighted by the number of covered lives, the weighted mean was 76%, indicating that more products had lower MLRs, but most of the covered lives were in plans with higher ratios.

Additionally, preferred provider organization (PPO) products had a higher mean weighted medical loss ratio of 81% compared with health maintenance organization (HMO) products at 63%, as did products in the large-group market at 80% compared with the individual (60%) and small-group (61%) markets.

Number & percentage of California dental insurance products that met specific thresholds
    No. (%) that met specific threshold
Total No. of products NAIC CA SB 1008 ACA
HMOs 99 41 (41%) 11 (11%) 3 (3%)
PPOs 129 90 (70%) 54 (42%) 17 (13%)
Individual market 65 22 (34%) 13 (20%) 5 (8%)
Small-group market 84 42 (50%) 15 (18%) 8 (10%)
Large-group market 79 67 (85%) 37 (47%) 7 (9%)
All 228 131 (57%) 65 (29%) 20 (9%)

Only 20 products (9%) met ACA thresholds, 65 products (29%) acheived California thresholds, and 131 products (57%) met NAIC thresholds. The 43% of products that didn't meet NAIC thresholds served 13% of Californians or 1.25 million people. PPO versus HMO products and large-group versus individual and small-group products were more likely to meet thresholds.

"Half of Californians with dental insurance were in plans with an MLR over 80%," Dr. Finocchio told "However, 6.6 million Californians were covered by dental products that would not meet the minimum MLR standard required by the ACA for health plans and do not appear to receive value for the premium dollars."

In addition, Dr. Finocchio stated that he found the following findings to be of most interest:

  • There was a wide range of medical loss ratios across dental products.
  • Most products did not achieve the ACA MLR thresholds. However, with reduced thresholds, such as in the California bill and NAIC proposed levels, more plans did.
  • Products with large enrollments achieved higher MLRs, indicating that product size matters in achieving economies of scale.

At the same time, some products covering fewer than 5,000 insured lives reported MLRs above 80%, suggesting that providing value for consumers is possible at a smaller scale, the authors noted.

Solutions complex

"The complexity of minimally standardized dental insurance marketplaces presents a challenge for legislators to create regulatory specificity to inform and protect consumers," Dr. Finocchio told

He and his co-author recommended the performance of a multidisciplinary and comprehensive analysis of the actuarial values of various dental products to determine an appropriate threshold.

"In a marketplace with such a diversity of dental products, consumers would benefit from a financial tool, such as the MLR, to help them determine the product that delivers the most value for their premium dollars," Dr. Finocchio concluded.

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