ACA & the new normal

Affordable Care Act Provides Inroads to Growth for U.S. Dental Insurance Market

More ingrained in the US HealthCare system

OLDWICK, N.J., October 26, 2016 — Dental benefit coverage offerings have seen an uptick over the last few years as the Patient Protection and Affordable Care Act (ACA) has become more ingrained within the U.S. health care system, according to a new A.M Best report.

The Best’s Special Report, titled, “The Dental Landscape—Consistent Profitability, Exchange Opportunities, Increasing Competition,” notes that companies that filed an annual health statement with the National Association of Insurance Commissioners increased their dental net premiums written by 76.7% over the last decade, to $16.7 billion in 2015 from $9.4 billion in 2005. The largest annual rate of growth came in 2014, when net premiums written increased 14.4% year over year. Similarly, enrollment grew 53.4% for the same time period, increasing to 71.0 million in 2015 from 46.3 million members in 2005, with a 19% year-over-year increase in 2014.

Despite geographic and provider network challenges, dental business has provided health insurers with steady net operating gain profitability over the last decade, with a fairly substantial improvement in results since 2009. The consistent operating profitability has been supported by a tightly range-bound loss ratio between a low of 60.4% reported in 2008 to a peak of 64.3% reported in 2013.

Dental writers benefit from the mostly consistent utilization of policyholders, and usually do not experience large one-time shock claims that may be associated with more typical health lines of business, which ultimately keeps the loss ratio at fairly manageable and predictable levels. As companies expand into individual dental markets where adverse selection is a potential risk, the products are modified to include longer waiting periods for major dental services and lower annual maximums.

Concentrated Market Share

Dental business has provided health insurers with steady net operating gain profitability over the last decade.

Market share in the overall market is concentrated, as the top 10 dental writers account for 61.5% of the market, with Metropolitan Life & Affiliated Companies holding the dominant share at 17.3%. The individual dental market also is highly concentrated as the top 10 players account for 66.9% of the market, led by MCNA Insurance Company’s 30.2%. Individual dental benefits are a relatively new phenomena, with interest emerging and premium growing rapidly over the last 10 years.

Nevertheless, regardless of some provider network challenges and certain underserved geographic areas, the dental insurance industry still is poised for growth as employees continue to value the benefit offering from employers and more dental insurers are participating in the ACA exchanges. A.M. Best believes increasing competition, including numerous small carriers expanding their exchange offerings, may pressure operating results on a company-by-company basis, but underwriting gains in each of the last five years are substantially higher than levels recorded in 2005-2009. A.M. Best recognizes the changing dynamics of the industry and will continue to monitor the performance of the sector, as well as company-specific trends.

To access a copy of this special report, please visit here.




A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit here. Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.