Medical Loss Ratio Rules Don’t Work with Dental Plans
Find out how medical loss ratios for dental plans affect brokers and their clients.
A medical loss ratio is designed to ensure quality of care for insureds and spending transparency by requiring that health insurers spend no less than 80%–85% of premium dollars on that care.
While the Affordable Care Act mandate applies only to health plans, legislation considered in dozens of states would apply it to dental plans.
“But that standard doesn’t translate to dental,” says Kate McCown, vice president of compliance at Ameritas. “People assume dental insurers aren’t putting enough toward care, but dental coverage works very differently from medical. A medical‑style loss ratio simply isn’t the right measure for dental plans.”
Dental services are predictable. Dental plans emphasize and reward preventive care, and claims are smaller and more frequent than medical claims. “Because of this structure,” McCown says, “a dental plan is not intended to spend 85% of premiums on claims like medical plans do.”
Medical Insurance vs. Dental Insurance
Medical and dental plans have other distinct differences.
Premium scale. Dental premiums are roughly one-twentieth the cost of medical premiums—on average, about $30 per month versus $600.
Fixed cost proportions. Dental and medical plans incur the same operational costs for customer service, claims processing, regulatory compliance, provider credentialing, and systems security. Those fixed costs do not decrease in proportion with dental plans’ lower premium volume.
How a premium dollar is spent. Most stand-alone dental premium dollars fund patient care (claims, up to 70%) and essential operations (20% or more), leaving 10%–15% for broker commissions and profit. Increasing the payout to customers would mean decreasing or eliminating broker commissions and/or profit.
Negative Outcomes
In 2022, Massachusetts required dental insurers to meet an 83% loss ratio or refund the difference to policyholders. As a result, many dental carriers stopped offering dental plans in certain markets or in the state as a whole. Some carriers filed for premium increases to meet the requirement.
Other unintended outcomes could include dental carriers narrowing dental networks, reducing customer service, and offering fewer plan options, McCown says. “The bottom line is quality and choice for consumers and employers are reduced.”
Carriers may also reduce broker commissions to meet loss ratio rules, which could limit the support brokers and advisors can provide to their clients.
A Better Approach
After Massachusetts, roughly 25 states introduced legislation to implement 75%–85% dental loss ratios for small and large groups.
“At Ameritas, we monitor activity in each state very closely so we can respond in the best interest of our customers and the producers we work with in the affected states,” McCown says. “But we believe there is a better approach.
“Ameritas supports transparency and reporting loss ratio information,” McCown says. “Thirteen states have agreed this is the best strategy.” In 2024, the National Congress of State Insurance Legislators established compromise model legislation with the American Dental Association and the insurance industry that would require dental insurers to report loss ratio data. The state’s insurance commissioner would address outliers and could require rate changes or premium refunds.
But the push for mandated dental loss ratios continues.
According to McCown, more meaningful indicators of a dental plan’s value include network discounts, access to dentists and specialists, use of preventive care, predictable out-of-pocket costs, and quality and responsive customer service.
“These matter far more to consumers and employers than a single percentage,” she says.
What Brokers Can Do
As employee benefits experts—and the voice of consumers—it’s essential for brokers to understand the impacts dental loss ratios could have on clients and their employees. Stay informed on legislation, market, premium, and product changes to help educate employers so dental benefits remain affordable and accessible.
Advocate for your broker community and clients through professional associations. Share your concerns and perspectives during discussions that could change policies in your state. “Brokers can explain how fewer provider choices or higher premiums affect access to care,” McCown says. “Their first-hand experience designing dental plans makes them essential to ensuring policies work for customers and the businesses that serve them.”
