How Loss Ratios Will Increase Your Dental Care Costs

In the last year, there have been several media reports about Medical Loss Ratios (MLR) for dental benefit plans, and some state legislatures are now considering the topic. To raise the understanding of MLR for the public, the National Association of Dental Plans provides this discussion document.

An arbitrary MLR selected only because it mirrors medical plan MLR pressures dental plans to raise payments to providers. This may benefit providers, but it certainly does not benefit you, the consumer.

Definition of Medical Loss Ratio

Medical loss ratio (MLR) is the share of premiums paid to a plan that are spent on medical claims and activities that improve the quality of care. The remainder is the share spent on administration, fees, and profits earned. Administration and fees include several valuable and required costs including onboarding new members, responding to member and provider questions, processing claims, complying with state and federal requirements, and paying taxes. For the regulation of medical plans, MLR is commonly used to measure whether plan payments to providers are high enough in comparison to administrative costs, fees, and profits.

You will pay the dentist more under an 80 percent (or higher) MLR.

The primary objective of a higher MLR for dental plans is higher payments to the dentist. It increases spending without improving care. Under an 80 percent or higher MLR, plans might need to raise premiums, and you will pay more at the dentist’s office.

Your out-of-pocket (OOP) expenses will increase because your cost-sharing portion of your dental coverage will increase. For example, if the dentist receives $100 for a procedure and your cost share is 20%, your co-pay is $20. If the dentist’s payment increases to $200 for the same procedure to meet an 80-percent MLR, your co-pay will be $40. Further, most dental plans have an annual maximum benefit. If dentists are paid more, consumers with the highest dental needs will exceed their annual maximum more quickly and will be responsible for 100 percent of the cost after reaching their maximum.

You may experience additional consequences.

Your dental premiums provide important services beyond paying the dentist for treatment received, including patient protection. Suppose plans are forced to increase provider payments while operating under an arbitrary MLR. In that case, they might be forced to make reductions in their important operations, including responding to member calls and considering whether to cover expensive and unusual procedures.

NADP believes you may experience the following negative impacts resulting from an 80-percent or higher dental MLR:

  • You may have to change dentists as plans shrink their networks to lower their administrative costs.
  • Your premiums may increase while your plan options decrease: It might not be feasible for many dental plans to administer their most popular plans under an arbitrary MLR. According to the Milliman Report, commissioned by NADP, you may see higher plan premiums, and a smaller selection of dental plans from which to choose. Milliman is an independent and leading national actuarial firm.
  • You may lose your Coverage: If you have individual or small group coverage, you may lose dental benefits because the carriers providing these plans are the ones that would most likely exit the market because they cannot operate under an arbitrary MLR.
  • Your oral health may suffer: Lack of dental insurance is the number one barrier to receiving dental care, according to the NADP 2021 Consumer Tracking Study. Thus, if your coverage is no longer available or affordable, you may be less likely to visit the dentist and receive the dental treatment you need.

Your medical and dental costs don’t compare.

Under the Affordable Care Act (Obamacare), medical plans (not dental plans) are subject to an 80 or 85 percent MLR. While MLRs are now commonplace for medical plans, the percentage required for medical plans cannot be reasonably applied for many of the most popular dental plans.

Here’s why:

In 2021, the national average dental plan premium for all commercial products was $29.63 per member per month, according to the NADP Dental Benefits Report: Premium 2021. Conversely, average national medical premiums covering a single individual were $645 a month, according to the Kaiser Family Foundation. This means your dental plan will have a little more than $5 per member per month (pmpm) to serve you compared to $109 pmpm for medical plans.

Dental plans have many of the same operating costs as medical carriers including answering calls, processing claims, and complying with regulations. Therefore, the fixed administrative costs of dental plans, as a percentage of the premium, received, are higher than for medical plans. While most medical plans routinely meet MLR requirements, dental plans will struggle and may be unable to meet the same MLR.

There’s a Better Approach.

NADP and dental plans stand ready to work with consumers, policymakers, and dentists. We understand dentists' importance and want to ensure they receive appropriate compensation. NADP is firmly against arbitrarily high MLRs copied from medical plans without considering how dental is different. But NADP is not against more reasonable approaches, such as the one in Maine, where the state collects dental plan information and may set an MLR based on good practices in the future.

We look forward to playing a constructive role in ensuring dental plans deliver high-value dental care to consumers for decades.