Massachusetts residents can vote to eliminate potential administrative waste on their dental insurance premiums in a November referendum, but new analysis warns consumers won’t necessarily see a major impact – even if the issue succeeds at the polls .
Question 2 on the general election ballot asks if voters support requiring dental insurance companies to spend 83% of premiums on patient care, not on administrative expenses, taxes, or profits. If carriers are spending less than 83 cents on every dollar of monthly subscription premiums — a threshold known as the loss ratio — they must send rebates to insured individuals and groups.
But it’s difficult to assess whether the loss rate is set at the correct amount, as well as the impact it could have on dentists and patients, according to a report released Thursday by Jonathan M’s Center for State Policy Analysis. Tisch of Tufts University. College of Civil Life.
“This voting question is constructed on relatively thin information,” states the report shared with MassLive. “It is unclear whether dental insurers are currently close or far from the proposed 83% requirement. Indeed, there is no clear basis for the 83% figure, and imposing it would make us the only state with a fixed loss ratio for dental insurance.
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In other words, the report posits that there could be “relatively small results” or “potentially more substantial” and dramatic results from the referendum, depending on the validity of the scant research to date.
The updated dental insurance provision would come into effect in January 2024.
The report, which does not take a position for or against the question of the vote, notes that the establishment of a dental loss ratio echoes a common standard for medical insurance. In Massachusetts, medical insurers must meet an 85% or 88% ratio, but they also have more flexibility than dental insurers would have to comply with state regulations.
High medical insurance premiums are also based on higher risk calculations, unlike cheaper dental insurance premiums which take into account lower risks and stricter “use limits”.
“In developing loss ratios for medical insurance, legislators and regulators have been guided by extensive information about market dynamics and the financial health of insurers,” the report said. “There is no similar information on the current finances of dental insurers in Massachusetts. The only relevant study released uses sound methods, but was commissioned by a national professional group for dental insurers.
The study, commissioned by the National Association of Dental Plans, found that most major insurance plans are already in the rough referendum phase, with their loss rates hovering around 80%. To add 3 percentage points, insurers would have to cut monthly premiums or streamline operations to reduce administrative costs or profits, according to the Tufts report.
In another option, insurers could pay more for dental claims, such as allowing dentists to charge more for their procedures. This, in effect, may give dentists greater bargaining power as insurers simultaneously scramble to meet their new loss ratio requirement.
But it could also encourage patients to pay more for their dental care.
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“One reason is that most dental insurance includes fairly high coinsurance rates, where the patient pays a percentage of the total cost,” the report says. “Another is that with higher prices, more patients will reach their annual maximum – and will have to pay for any additional care with their own money.”
The report mitigates this scenario, however, by predicting that price increases “should be limited.” The referendum vote “is unlikely to trigger the kind of big premium cuts that could make insurance more affordable,” the report said.
A voter information guide from Secretary of State Bill Galvin’s office contains a more stern warning about the ballot issue. An opposing view from Louis Rizoli of the Committee to Protect Public Access to Quality Dental Care claims that thousands of Bay Staters would lose their dental insurance.
“With consumer prices soaring, we don’t need new regulation that will increase costs and reduce choice,” Rizoli wrote.
Still, the ballot issue could spur a more transparent insurance market, paving the way for “more deliberate policy adjustments in the future,” the report says. Dental plans should comply with regular reporting requirements, such as disclosing their claims ratio and administrative expenses to the Commissioner of the Massachusetts Division of Insurance.
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The Dental Insurance Quality Committee, which supports the ballot issue, said Delta Dental paid $382 million in bonuses, commissions and payments to executives in 2019 in Massachusetts, while spending $177 million in patient care, according to the state’s voter information guide.
If the ballot question passes, the Massachusetts legislature could adjust the loss rate and manage its implementation, perhaps rolling out a phased approach to reach 83%.
“If voters reject this ballot question, the status quo will continue, meaning dental insurance companies will maintain their current balance of premiums and prices,” the report said. “At the same time, there will be no reporting changes or general improvement in our knowledge of the underlying finances of Massachusetts dental insurers.”