Since Massachusetts voters overwhelmingly voted in favor of Question 2, the “Patient Access to Affordable Dental Care Act” in November 2022, instituting the nation’s first dental loss ratio, there has been a push to get other states on board with similar legislation.
Dental loss ratio win in Massachusetts
Question 2 mandated that dental insurance carriers in the state had to spend at least 83% of premiums on members’ dental expenses and quality improvements instead of administrative expenses, similar to the medical loss ratio (MLR) in healthcare insurance under the Affordable Care Act. If the standard of 83% isn’t met, the companies have to issue rebates to enrollees.
Needless to say, this voter-led legislation puts a significant hole in insurance company profits for inefficient carriers and has been criticized by the dental insurance lobby group, National Association of Dental Plans (NADP).
ADA compromise with dental carrier lobby group
While the ADA had a leading role in the Question 2 win in MA, their recent compromise agreement with the NADP for a DLR template framework, as demanded by the National Council of Insurance Legislators (NCOIL), has come under criticism for serious deficiencies (copy below). The importance of NCOIL backing such model legislation cannot be understated as it guides state-level efforts to regulate dental insurance practices. A good framework would provide a pathway for insurance commissioners to identify and remediate carriers with exceptionally low loss ratios, aiming to balance market dynamics with consumer protection.
Criticisms
However, the deficiencies in the agreement are such as to nullify any real effect of a DLR, according to Dr. Mouhab Rizkallah, who pioneered the Question 2 initiative in MA but wasn’t consulted by the ADA in formulating the compromise framework with NADP.
Dr. Rizkallah told TDMR:
“The worst loophole in the ADA-NADP compromise is the agreed-to definition of Dental Loss Ratio, which allows insurers to subtract nonprofit community expenditures from their total premium revenue (the DLR denominator). To state this loophole as a simulation, if a company collected $1 Billion in premium revenue, paid $500 Million in patient care, and gave away $500 Million to their non-profit affiliate, in Massachusetts their DLR would be 50%, whereas the ADA-NADP compromise would show a 100% DLR.
“If you think that simulation is just theoretical, you will be shocked to know that in 2019, Delta Dental of Massachusetts contributed $291 Million dollars to their own non-profit affiliate (Catalyst Institute), while only paying $177 Million that same year for patient care. In 2018, they moved $327 Million to Catalyst Institute. Massachusetts Question 2 stops this from recurring.
“Now in Massachusetts, charitable contributions cannot be subtracted from total premiums, because I defined all charitable contributions as administrative costs of the Insurer (I placed contributions in their allowed 17% of premium revenue). To compromise on this renders DLR meaningless. And that compromise is just one of the many problems with the ADA-NADP compromise agreement on DLR.”
Agreement problems
TDMR analysis shows the following are problematic:
1. Roving DLR: The model legislation’s approach to identifying and remedying outliers through a “roving DLR” based on average market ratios is problematic. This methodology could potentially allow insurers to maintain strategies that minimize spending on patient care, as long as they remain within a fluctuating benchmark that doesn’t necessarily incentivize improvements in patient care spending.
This is problematic for the ADA as the agreement violates the ADA House of Delegates policy requiring a “specific loss ratio” for dental plans.
2. Nonprofit Community Expenditures and Quality Improvement Activities: The exclusion of “nonprofit community expenditures” and broad definitions of “Quality Improvement Activities” from the DLR calculation might provide insurers with a loophole to divert funds in ways that do not directly benefit patient care, potentially inflating the DLR and undermining the framework’s transparency objectives.
3. Broker Commissions: The handling of broker commissions within the DLR calculation also raises eyebrows. By allowing these commissions to be excluded from the premium revenue used to calculate the DLR, there’s a risk that the true proportion of premiums spent on patient care could be misrepresented, offering insurers a pathway to meet regulatory thresholds without genuinely increasing patient care investments.
Petition to ADA and ADA survey
There is an online petition for dentists to have the ADA roll back the agreement.
This backlash has apparently led the ADA to conduct a survey of its membership on its medical (dental) loss ratio policy. The survey is open until April 15.
However, the growing list of critics of the agreement is asking the ADA to pull back before that date as the agreement will be ratified by NCOIL at its Spring Meeting in Nashville, TN, from April 11 -14.
The Oklahoma Dental Association was also critical of the ADA’s NCOIL “compromise” (a.k.a. capitulation) w/ the insurance industry. They contend this agreement undermines their efforts at meaningful reforms in the OK State Legislature & efforts to bring the public better dental insurance products w/ greater value & transparency.
Michael W Davis, DDS
Santa Fe, NM
Other states, eg RI, have similarly found the NCOIL DLR agreement is weaponized by Delta and the insurance lobby, and the fact that ADA signed the NCOIL model legislation is used in shooting down their bills aiming for clean, accurate data reporting and tangible insurance reform for all fully-insured patients by prescribing a specific DLR ratio. ADA continues to call the model agreement a “floor” and states are not bound to stick with its provisions. However, the dental insurance lobby is treating the model agreement as a ceiling. States that believe the ADA’s description of the model and seek passage of that model will find that very few of the states’s patients will see improvements in their coverage, and any improvements will take years to begin, and decades to appreciably raise the state’s DLR. In all that time, Delta and the other insurers can legally report inflated DLRs to sell their plans.
What state societies and the states’ fully insured patients need ASAP is for ADA to formally retract their support for the NCOIL DLR Model Legislation, staying the reasons clearly to send the message that ADA Fights for Dentists.