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ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
dental insurance; medical loss ratio
Purpose
Requires dental service corporations, health care services organizations, disability insurers, group disability insurers and blanket disability insurers (dental insurers) to annually file a medical loss ratio (MLR) report with the Department of Insurance and Financial Institutions (DIFI) and outlines procedures for the payment of a rebate to insureds following the filing of an MLR report in certain circumstances.
Background
DIFI regulates and monitors insurance companies and professionals
operating in Arizona to protect the public and help ensure that these entities
follow Arizona and federal laws (Ariz.
Const. art. 15 § 5). DIFI is responsible for: 1) licensing qualified
insurance professionals and companies; 2) investigating consumer complaints and
suspected fraud; 3) overseeing insurance companies’ financial solvency; 4)
reviewing insurance policies, rates and products; and
5) administering funds (A.R.S. §§ 20-285;
20-376;
20-466;
20-491.03;
20-662;
and 20-683).
Laws 2010, Chapter 170 prohibited contracts between certain dental insurers and a licensed dentist from requiring the dentist to provide a patient services based on a fee set by the dental insurer, unless the fee is for a covered service under the patient’s dental insurance subscription contract, evidence of coverage or applicable policy. This restricted fee requirement applies to contracts between a licensed dentist and any of the following types of dental insurers: 1) dental service corporations; 2) health care services organizations; 3) disability insurers; 4) group disability insurers; or 5) blanket disability insurers.
The federal Affordable Care Act (ACA) requires a health insurance issuer to: 1) submit data on the proportion of premium revenues spent on clinical services and quality improvement, also known as the MLR; 2) spend at least 80 percent, for small group markets, or 85 percent, for large group markets, of premium dollars on medical care; and 3) issue rebates to enrollees if this percentage does not meet minimum standards (CMS and P.L. 111–148, 111th Congress, 2010).
A large group market and small group market are the health insurance markets under which individuals obtain health insurance coverage, directly or through any arrangement, on behalf of themselves and their dependents through a group health plan maintained by a large or small employer as defined (42 U.S.C. § 18024).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Requires a dental insurer that offers, issues or renews a subscription contract, evidence of coverage or policy covering dental services to annually file with DIFI by March 31 an MLR report that is organized by market and product type.
2. Stipulates that a dental insurer owes a rebate to insureds on a pro rata basis by August 1 following the calendar year for which an MLR report was filed, if the MLR:
a) is less than 85 percent for a large group market dental insurer; or
b) is less than 80 percent for a small group market dental insurer.
3. Sets the rebate calculation for a large group market dental insurer at the percentage amount under 85 percent, multiplied by the total premium revenue.
4. Sets the rebate calculation for a small group market dental insurer at the percentage amount under 80 percent, multiplied by the total premium revenue.
5. Requires DIFI to notify a dental insurer at least 30 days before beginning a financial examination, if data verification of an MLR is deemed necessary.
6. Requires a dental insurer to submit all requested data to DIFI within 30 days after receiving the notice.
7. Allows DIFI, on a finding of good cause, to extend the time for a dental insurer to comply with the data submission.
8. Requires the MLR report to contain the following information:
a) the company name;
b) the group affiliation;
c) the federal employment identification number;
d) the best daytime contact telephone number;
e) the National Association of Insurance Commissioners group code;
f) the doing business as name;
g) the issuer identification number;
h) in what state business is being conducted;
i) the domiciliary state;
j) the address;
k) the federal tax-exempt number;
l) the marketplace;
m) the merge markets;
n) the nonprofit number; and
o) the MLR reporting year.
9. Requires DIFI to make the MLR report and all data provided by a dental insurer publicly available.
10. Exempts a dental insurer that provides services under the Children's Health Insurance Program or the state's health and accident insurance from the MLR report requirements.
11. Requires, by July 1 of the preceding year, a dental insurer to file group product base rates and any changes to the group rating factors that are to become effective January 1 of each calendar year.
12. Requires DIFI to deny the group product base rates or group rating factors, if the group product base rates or the group rating factors are excessive, inadequate or unreasonable in relation to the benefits charged or are discriminatory or not actuarily sound.
13. Requires DIFI to presumptively deny group product base rates or group rating factors if any of the following apply:
a) a dental insurer files a base rate change and the administrative expense loading component, including taxes and assessments, increased by more than the most recent calendar year's percentage increase in the consumer price index for dental services for all urban consumers, U.S. city average;
b) a dental insurer's reported contribution to surplus exceeds 1.9 percent;
c) the aggregate MLR for all plans offered by a large group dental insurer is less than 85 percent; or
d) the aggregate MLR for all plans offered by a small group dental insurer is less than 80 percent.
14. Requires a dental insurer to notify all insureds if DIFI presumptively denies the group product base rates or group rating factors.
15. Prohibits a dental insurer from implementing denied rates unless DIFI or a court of competent jurisdiction reverses the denial and allows a dental insurer to request an administrative hearing.
16. Specifies that the MLR reporting year is the calendar year during which dental coverage is provided by the subscription contract, evidence of coverage or policy.
17. Requires all terms used in an MLR report to have the same meanings prescribed in the federal Public Health Service Act.
18. Defines medical loss ratio as the percentage of all premiums that are collected by a dental service corporation each year and that are spent on dental services and activities that improve the quality of dental care, excluding federal and state taxes, licensing or regulatory fees, risk adjustment fees, risk corridors and reinsurance costs.
19. Defines large group market and small group market.
20. Makes technical and conforming changes.
21. Becomes effective on the general effective date.
Prepared by Senate Research
February 9, 2023
MG/MC/sr