Small Employers Discuss the Impact of Massachusetts MLR Law

This month, guest blogger and NADP Director of Research, Jerry Berggren, shares key insights on MLR in Massachusetts.

In 2022, Massachusetts established by public ballot a fixed loss ratio for dental insurance, and the law went into effect on January 1 of this year. NADP has been concerned about the negative impacts of this law. The California Health Benefits Review Program¹ warned of the potential impacts of dental medial lost ratio (MLR) legislation when a Massachusetts-like bill introduced last year in that state. CHBRP warned that impacts might include:

• Higher premiums
• Consolidation of the market, resulting in fewer choices, especially in the small group and individual markets
• Fewer employers will offer dental benefits or subsidize the benefits they do offer
• Fewer dentists will be available in-network
• Customer service costs would be cut, impacting service quality.

The first impacts of that law are now becoming observable. In January, NADP contracted with Alan Newman Research (ANR), to conduct a series of interviews with benefit decision makers at small employers.^2,3 Equal numbers of interviews were conducted with individuals representing Massachusetts based companies of less than 20 employees, 20-49 employees, and 50-99 employees.

Changes in Dental Benefits

So far, the changes these employers noticed in their dental plans recently include:

• Small increases in premium
• Some changes in the dental networks that affected them or their employees directly
• A small number of employers were forced to switch carriers because their previous carrier was no longer offering plans to companies of their size

The Broker Relationship

The study found brokers are relied upon by most of the employers, not a surprise for those familiar with the small group dental insurance market. Last year NADP hired NORC to interview brokers in the small group market.⁴ The biggest concern for the brokers was the impact on compensation. Said one broker of dental plans, “If they are confined to a loss ratio, the first thing that will go is broker commissions.”

A representative of a small group plan agreed, “That’s the greatest change we made, is we reduced our broker comp.”

And finally, a recent review of plan filings in Massachusetts conducted by Charm Economics on behalf of NADP, revealed that most the carriers that reported commission changes lowered their commissions from 10% (the industry norm) to 5% or less.

Brokers are professionals who do the best work they can for their clients, but when they are paid half as much (or less), the level of service that they can provide likely suffers.

EDUCATION

Loss Ratio is a complex concept for those outside of the insurance industry to understand. Our interviews with small groups demonstrated that nearly all the respondents, on first blush, thought the concept of a mandated loss ratio on dental benefits was a reasonable idea. However, when presented information about the potential impacts of the Massachusetts law, as described in a Milliman analysis of the Massachusetts law, most interviewees were able to understand how the Loss Ratio requirement for dental plans could lead to negative consequences.

One employer summarized the potential MLR effects rather bluntly, “That doesn’t give the insurer a lot to work with. […] Obviously the nut has to be bigger. […] That is going to impact us.”

While NADP is continuing to monitor the effects of Massachusetts’ dental MLR and continuing to educate legislators and regulators on the positive and negative impacts of fixed loss ratios comparable to those in medical, carriers also are better positioned for the conversation with brokers and employers.

Sources:

1. Link to CHBRP Report 
2. Full Report from ANR, Knowledge Center
3. Summary of Findings from ANR, Knowledge Center
4. NORC Report, Knowledge Center