SB203INTRODUCED
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SB203
HGG9B68-1
By Senator Shelnutt
RFD: Banking and Insurance
First Read: 27-Feb-25
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5 HGG9B68-1 02/26/2025 JC (L)lg 2025-1018
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First Read: 27-Feb-25
SYNOPSIS:
The law does not currently regulate how insurers
that cover dental care spend the premiums received from
individuals and groups that contract for dental care
payment or reimbursement.
This bill would require dental insurers to spend
at least 85 percent of the premiums they receive on
customer claims. Dental insurers that fail to spend at
least 85 percent of premiums on claims would be
required to refund the excess premiums retained to
policyholders.
This bill would further require dental insurers
to report certain income and expense information to the
Commissioner of Insurance on an annual basis, and make
it available to the public.
This bill would also require the Commissioner of
Insurance to disallow proposed rate increases by dental
insurers that exceed the consumer price index for
dental services, and would provide an opportunity for a
hearing if the insurer seeks to reverse the
commissioner's decision.
A BILL
TO BE ENTITLED
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TO BE ENTITLED
AN ACT
Relating to dental insurance; to establish a medical
loss ratio as a percentage of premiums collected by an
insurer; to require reporting of the insurer's claims expenses
and income information for compliance with the medical loss
ratio; to require an insurer to give a rebate to enrollees if
payments on claims are below the medical loss ratio; to
provide for disclosure of insurer financial information; to
prohibit excessive increases in premiums; and to amend
Sections 10A-20-6.16 and 27-21A-23, Code of Alabama 1975, to
make conforming changes.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. (a) For the purposes of this section, the
following terms have the following meanings:
(1) COMMISSIONER. The Commissioner of Insurance.
(2) DENTAL BENEFIT PLAN. Any stand-alone individual or
group plan, policy, or contract issued, delivered, or renewed
in this state which is limited to paying or reimbursing the
costs of dental care services.
(3) DENTAL CARE SERVICES. Any services furnished to an
individual for the purpose of preventing, managing,
alleviating, curing, or healing dental illness or injury as
indicated by codes used for payment or reimbursement by the
insurer.
(4) HEALTH BENEFIT PLAN. a. Any individual or group
plan, policy, or contract issued, delivered, or renewed in
this state that, in addition to paying or reimbursing for
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this state that, in addition to paying or reimbursing for
hospitalization, physician care, treatment, surgery, therapy,
drugs, equipment, and other medical expenses, also includes
coverage for some dental care services.
b. The term does not include accident-only, specified
disease, individual hospital indemnity, credit, Medicare
supplement, long-term care, disability income, or other
limited benefit health insurance policies, or coverage issued
as supplemental to liability insurance, workers' compensation,
or automobile medical payment insurance.
(5) INSURER. A person as defined in Section 27-1-2,
Code of Alabama 1975, which issues, delivers, or renews a
dental benefit plan or a health benefit plan.
(6) MEDICAL LOSS RATIO. The percentage of premiums
collected by an insurer from policyholders or subscribers
which the insurer spends on dental care services for patients.
(7) REPORTING YEAR. A calendar year.
(b)(1) The minimum medical loss ratio for dental
benefit plans and health benefit plans in this state shall be
85 percent, to be calculated pursuant to subdivisions (2)
through (4).
(2) The percentage is a fraction of which the numerator
is the aggregated claims paid for dental care services by the
insurer in a reporting year, and the denominator is the amount
of all premiums collected by the insurer in a reporting year.
(3)a. The aggregated claims paid by the insurer for
dental care services shall be calculated by:
1. Adding the amount paid or reimbursed on claims for
dental care services; then
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dental care services; then
2. Adding the amount of reserves and liabilities for
claims received during the reporting year but unpaid or not
reimbursed within three months after the end of the reporting
year; then
3. Subtracting any amount expended for dental care
services that was recovered due to overpayment or utilization
management.
b. The amount of all premiums collected by the insurer
shall be calculated by:
1. Including the total amount of money received from
policyholders or subscribers as a condition of receiving
coverage for dental care services; then
2. Subtracting payments for federal and state taxes,
licensing, and regulatory fees; then
3. Including any net addition or subtraction resulting
from payments or receipts for risk adjustment, risk corridors,
or reinsurance.
(4) The insurer's overhead expenses, to include all of
the following components, shall be excluded from the
calculations made under subdivision (3):
a. Financial administration expenses, including
underwriting, auditing, actuarial analyses, treasury, and
investment expenses.
b. Marketing, sales, and distribution expenses,
including advertising; group, policyholder, or subscriber
enrollment and relations, regardless of whether these
activities are performed by the carrier or outsourced to a
third-party vendor.
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third-party vendor.
c. Distribution expenses, including commissions, and
relations with agents, producers, brokers, and benefit
consultants.
d. Claims operation expenses, including adjudication,
appeals, settlements, claims payment processing, and costs
directly related to upgrades in health information technology
that are designed primarily or solely to improve claims
payment capabilities or to meet regulatory requirements for
processing claims.
e. Dental administration expenses, including activities
related to care and disease management, utilization review,
dental management, network development, secondary network
savings, administrative fees, claims processing, utilization
management, fraud prevention activities, and provider
credentialing expenses, regardless of whether these activities
are performed by the carrier or outsourced to a third-party
vendor.
f. Provider expenses, such as consultants for
professional or administrative services that do not represent
compensation or reimbursement for covered services provided to
an enrollee.
g. Expenses incurred for developing and executing
provider contracts, including fees associated with
establishing or managing a provider network, and fees paid to
vendors, costs of stop-loss coverage or reinsurance, direct
sales salaries, workforce salaries and benefits, agents and
broker fees and commissions, and general and administrative
expenses.
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expenses.
h. Network operational expenses, including contracting,
dentist relations, and dental policy procedures.
i. Charitable expenses, including any contributions to
tax-exempt foundations and community benefits.
j. Industry association expenses, including membership
activities.
k. Employee and personnel expenses, including payroll,
recruitment, and human resources.
l. Physical plant expenses, including construction,
leasing, maintenance, cleaning, furniture, and equipment.
m. Third-party vendor and professional contractor
expenses, including related services or goods required under
paragraphs a. through l.
(c)(1) No later than March 31, an insurer shall file a
report with the commissioner which shall include all of the
following information for the previous reporting year:
a. All dental care services and products offered by the
insurer, identifying each individual and group dental benefit
plan or health benefit plan, with the number of individuals
enrolled under each plan.
b. Gross income, including gross premiums collected by
the insurer.
c. Medical loss ratio.
d. The aggregated claims paid by the insurer for dental
care services, including each amount required under
subparagraphs (b)(3)a.1. through 3.
e. The amount of premiums collected by the insurer,
including each amount required under subparagraphs (b)(3)b.1.
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including each amount required under subparagraphs (b)(3)b.1.
through 3.
f. Overhead expenses, presenting each amount required
under paragraphs (b)(4)a. through m.
g. Realized capital gains and losses.
h. Net income.
i. Accumulated surplus.
j. Accumulated reserves.
k. Risk-based capital ratio, based on a formula
developed by the National Association of Insurance
Commissioners.
(2) The commissioner shall make available to the public
the information submitted by the insurer pursuant to
subdivision (1) by posting the information on the website of
the Department of Insurance of the State of Alabama.
(3)a. If the commissioner has reasonable cause to
believe that the information submitted by the insurer pursuant
to subdivision (1) is erroneous or false, the commissioner may
conduct an examination of the insurer to verify the
information submitted according to the procedures provided
under Article 1 of Chapter 2 of Title 27, Code of Alabama
1975.
b. The provisions of Article 1 of Chapter 2 of Title
27, Code of Alabama 1975, including confidentiality of
information, remedies, and procedures available to both the
commissioner and the insurer, shall govern an examination
conducted pursuant to paragraph a.
(d)(1) If the report required by subsection (c), as
submitted by the insurer or as adjusted by the commissioner
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submitted by the insurer or as adjusted by the commissioner
upon an examination as provided in that subsection, shows that
the medical loss ratio for the reporting year is less than 85
percent, the insurer shall refund the excess premium collected
to the covered individuals or groups as a rebate.
(2) The total amount of the rebate shall equal the
amount by which the medical loss ratio authorized by
subdivision (b)(1) exceeds the insurer's reported medical loss
ratio, multiplied by the amount of all premiums collected by
the insurer as calculated under paragraph (b)(3)b.
(3) Within 30 days of the calculation of the rebate,
the insurer shall notify all individuals and groups that were
covered under the applicable reporting year that they qualify
for the refund, which may be paid directly to the individuals
and groups or issued as a credit on the premium for the
subsequent reporting year.
(e)(1) Insurers shall file with the commissioner
proposed premium rates or any changes to rating factors that
are to take effect on January 1, on or before July 1 of the
preceding year.
(2)a. The commissioner shall disapprove: (i) any
proposed premium rates that are excessive, inadequate, or
unreasonable in relation to the dental care services provided
under the dental benefit plan or the health benefit plan; and
(ii) any proposed change to rating factors that is
discriminatory or actuarially unsound.
b. A proposed premium rate is presumptively excessive
if any of the following apply:
1. The premium rate adjustment increases by more than
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1. The premium rate adjustment increases by more than
the most recent calendar year's percentage increase in the
dental services consumer price index, U.S. city average.
2. The insurer's reported contribution to surplus
exceeds 1.9 percent.
3. The aggregate medical loss ratio for all plans
paying or reimbursing for dental care services offered by the
insurer is less than 85 percent.
(3) If the commissioner disapproves a submission made
pursuant to subdivision (1), the commissioner shall notify the
insurer no later than October 1, and the insurer may request a
hearing to reverse or modify the commissioner's decision,
which shall be conducted according to the notice, hearing, and
appeal procedures as provided under Article 1 of Chapter 2 of
Title 27, Code of Alabama 1975.
(4) For any hearing conducted pursuant to subdivision
(3) concerning a proposed premium rate increase, the following
requirements shall be met:
a. The insurer shall notify the policyholders or
subscribers who would be affected by the increase that it is
requesting a hearing to reverse or modify the commissioner's
decision.
b. Public notice pursuant to Section 27-2-29, Code of
Alabama 1975, shall also be given by the commissioner to the
policyholders or subscribers, as individuals whose pecuniary
interests are to be directly and immediately affected in case
of an order reversing or modifying the commissioner's
decision.
c. Opportunity shall be given by the commissioner for
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c. Opportunity shall be given by the commissioner for
at least three policyholders or subscribers to testify at the
hearing concerning the impact of reversing or modifying the
commissioner's decision, which testimony shall be made a part
of the record.
(f) The commissioner shall adopt rules, forms, and
schedules necessary to implement and enforce this section.
Section 2. Sections 10A-20-6.16 and 27-21A-23, Code of
Alabama 1975, are amended to read as follows:
"§10A-20-6.16
(a) No statute of this state applying to insurance
companies shall be applicable to any corporation organized
under this article and amendments thereto or to any contract
made by the corporation; except the corporation shall be
subject to the following:
(1) The provisions regarding annual premium tax to be
paid by insurers on insurance premiums.
(2) Chapter 55 of Title 27.
(3) Article 2 and Article 3 of Chapter 19 of Title 27.
(4) Section 27-1-17.
(5) Chapter 56 of Title 27.
(6) Rules adopted by the Commissioner of Insurance
pursuant to Sections 27-7-43 and 27-7-44.
(7) Chapter 54 of Title 27.
(8) Chapter 57 of Title 27.
(9) Chapter 58 of Title 27.
(10) Chapter 59 of Title 27.
(11) Chapter 54A of Title 27.
(12) Chapter 12A of Title 27.
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(12) Chapter 12A of Title 27.
(13) Chapter 2B of Title 27.
(14) Chapter 29 of Title 27.
(15) Chapter 62 of Title 27.
(16) Chapter 63 of Title 27.
(17) Chapter 45A of Title 27.
(18) Section 1 of the act amending this section.
(b) The provisions in subsection (a) that require
specific types of coverage to be offered or provided shall not
apply when the corporation is administering a self-funded
benefit plan or similar plan, fund, or program that it does
not insure."
"§27-21A-23
(a) Except as otherwise provided in this chapter,
provisions of the insurance law and provisions of health care
service plan laws shall not be applicable to any health
maintenance organization granted a certificate of authority
under this chapter. This provision shall not apply to an
insurer or health care service plan licensed and regulated
pursuant to the insurance law or the health care service plan
laws of this state except with respect to its health
maintenance organization activities authorized and regulated
pursuant to this chapter.
(b) Solicitation of enrollees by a health maintenance
organization granted a certificate of authority shall not be
construed to violate any provision of law relating to
solicitation or advertising by health professionals.
(c) Any health maintenance organization authorized
under this chapter shall not be deemed to be practicing
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under this chapter shall not be deemed to be practicing
medicine and shall be exempt from the provisions of Section
34-24-310, et seq., relating to the practice of medicine.
(d) No person participating in the arrangements of a
health maintenance organization other than the actual provider
of health care services or supplies directly to enrollees and
their families shall be liable for negligence, misfeasance,
nonfeasance, or malpractice in connection with the furnishing
of such services and supplies.
(e) Nothing in this chapter shall be construed in any
way to repeal or conflict with any provision of the
certificate of need law.
(f) Notwithstanding the provisions of subsection (a), a
health maintenance organization shall be subject to all of the
following:
(1) Section 27-1-17.
(2) Chapter 56.
(3) Chapter 54.
(4) Chapter 57.
(5) Chapter 58.
(6) Chapter 59.
(7) Rules adopted by the Commissioner of Insurance
pursuant to Sections 27-7-43 and 27-7-44.
(8) Chapter 12A.
(9) Chapter 54A.
(10) Chapter 2B.
(11) Chapter 29.
(12) Chapter 62.
(13) Chapter 63.
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(13) Chapter 63.
(14) Chapter 45A
(15) Section 1 of the act amending this section ."
Section 3. This act shall become effective on October
1, 2025.
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