It might be tempting to think that dental premium rate development is straightforward; after all, the coverage is not particularly expensive, high-cost dental claims are rare, and plan liability is often limited by dollar benefit maximums. However, the longer your dental rating manual goes without a systematic review, the more risk your organization may be assuming without realizing it. In addition, if you use the same rating process across various dental markets without informed adjustments, you run the risk of significant mispricing.

Here are four reasons to take another look at your dental rating processes and controls.

1. Outdated dental base rates and trends can lead to over- or underpricing.

In working with many carriers this year to comply with new commercial dental rate filing requirements in California,¹ we discovered that some companies were using manual rating elements—base claim costs, rating factors, and/or pricing trends—that had not been reassessed in several years. While the new rule created an impetus for a close look at rating practices, ideally a rate manual refresh should occur on a regular basis for optimal premium rate development. Consider the following three rating elements.

Pricing trends

If you are not reassessing your trend assumptions regularly, premiums may gradually become misaligned with the market. Using higher-than-necessary trends can lead to uncompetitive rates; on the other hand, using insufficient trends exposes carriers to higher claims and loss ratios than priced for. You should review trends based on recent historical experience and explicitly account for expected upcoming changes (e.g., provider fee schedule updates, regulatory changes) to develop well-informed prospective trend assumptions. Since change is constant, reassessing trend assumptions periodically is critical.

Base claim costs

Base manual claims should also be reset periodically to ensure alignment with expectations. You should rebase your rate manual by using updated utilization and unit cost data from your current book of business. The effects of small contractual changes over time (such as revised service frequency limits, updated replacement periods for restorations or crowns, or changes in age limits for child coverage) may compound and significantly affect cost levels. Additionally, new or modified procedure codes, shifts in provider or patient behavior, provider reimbursement changes, and efficiencies in claims processing and review can all affect your manual’s cost basis. By updating base manual claim costs and trend assumptions on a regular cadence, you ensure that your pricing assumptions accurately reflect the current and expected state of the dental product portfolio, keeping them competitive in the market.

Effect of trend on annual benefit maximum

For commercial dental products with an annual benefit maximum, there is a leveraging impact on the value of these fixed dollar limits over time as costs trend upward. The same benefit maximum becomes leaner each year because, as costs increase, the proportion of total costs borne by the plan will decrease, all else equal. Therefore, it is imperative to rebase any annual maximum factors in the rate manual for the cost slope associated with various annual maximums to remain current. Otherwise, you risk quoting manual rates that are out of line with your expectations and your competitors.

2. Misaligned manual rating factors can set dental insurance carriers up for selection risk.

Manual rating is a balancing act: Actuarial soundness, manageable pricing factor granularity, and competitive considerations all play a part. The desire to use detailed rating factors must be reality-checked against (1) the credibility of data to develop such granular factors, (2) the availability of actionable information during the quoting process to apply in rate development, (3) the risk of creating an overcomplicated rate manual with potentially false precision, and (4) how much detail competitors are using.

Consider the following rules of thumb when developing manual rating factors.

• Since rating factors developed from limited data may introduce more noise than accuracy, consider consolidating rate cells where experience is not meaningfully different or is non-credible (e.g., does employer industry affect dental claims down to the fourth digit of the industry code in a statistically significant manner?)
• On the other hand, not having detailed enough rate cells compared with your competitors could open you up to selection risk. If your broad risk categories miss nuances that competitors are capturing in more detailed manual rating factors, you will be more likely to win the “wrong” cases, either by overpricing favorable risks or underpricing higher risk groups.
• Even if the level of detail captured in your rate manual is sufficient, if your factors are not periodically reset and the factor slopes have become stale, you could be subject to unfavorable selection against competitors who are recalibrating and adjusting the slope of their rating factors on a more regular basis. The value of annual benefit maximums, as discussed earlier, is an example of this effect.
• Regular gathering of competitive intelligence via publicly available rate filings, combined with a strict cadence for reviewing and recalibrating rating manual factors, can help mitigate selection risk and improve competitive positioning.
• Consider what information is readily available to underwriters during the quoting process when developing rating factors. Even if there is an actuarial basis for rating according to a particular case characteristic, it is only actionable if the underwriter can apply it in practice.

3. A dental insurer’s credibility formula can set an organization up to win or lose the “right” business.

In our work with dental insurers, we see a wide range of dental credibility standards, from using health claims credibility levels for dental to applying full credibility at very small employer group sizes. Underweighting experience data relative to competitors increases selection risk, while overweighting experience can lead to increased claims volatility. A thoughtfully calibrated, dental-specific credibility formula is essential for protecting both the carrier and the customer, by preserving favorable business and ensuring that rates reflect their true risk.

There are two key differences between dental and medical claims that have important credibility implications.

• Lower claim volatility: Medical claim severity distributions have much larger tails in contrast to dental claim severity. A single root canal or crown, for example, rarely exceeds a few thousand dollars, whereas organ transplants or extended hospital stays may cost hundreds of thousands of dollars. At any given group size, the coefficient of variation (i.e., volatility of claims relative to the mean) is materially lower for dental versus medical. Additionally, annual benefit limits, while uncommon in medical policies, are a common feature in dental coverage to limit excess claims severity. Such limits further dampen claim volatility.
• Faster claim completion: Dental claims adjudicate much more quickly than medical claims. Carriers can have a more complete picture and reliable emerging experience data with significantly less claims run-out.

These features make dental experience more predictive of future claims than medical experience for the same size case.

All else being equal, applying lower credibility to case-level claims than is actuarially sound, or than competitors are applying, can lead to retaining cases with relatively worse experience and losing cases with relatively better experience. Reviewing what others in the dental insurance industry are doing and analyzing your own dental block of business using actuarially accepted credibility methodologies can help ensure that you don’t fall behind.

4. Using a group commercial dental rating manual to price other dental products can be risky.

Dental benefit pricing in the Medicare Advantage (MA) market serves as one example of the difficulties in using existing rating manuals for new markets. In MA plans, the prevalence and richness of dental coverage have grown exponentially over the last several years.² To price those benefits during a period of such rapid change, many carriers relied on their existing rate manuals, which typically assumed the stable utilization patterns associated with the commercial group dental market. Even if costs were adjusted to account for a Medicare-age population, several pricing elements were at risk of being misestimated, including the following.

• Utilizer rates, while stable in a commercial population, were affected in MA plans by induced utilization due to new or increased benefits, the type of MA plan (e.g., general enrollment versus special needs plans), provider network availability and access, utilization management protocols, and many other factors that may differ from a commercial dental framework.
• Procedure mix differences versus a commercially insured population were also evident, due to induced utilization from benefit upgrades and year-over-year increases in beneficiary understanding of their benefits.
• Differing utilization and selection impacts associated with MA dental coverage offered as an optional supplemental benefit compared with a mandatory embedded benefit within the MA plan, as well as the interactions between any mandatory and optional components, made relying on existing pricing models even more difficult.

While the MA dental market and its underlying pricing have begun to stabilize, for several years carriers had to grapple with the lack of applicability of existing rate manuals to this new space. This experience can serve as an example that applies more broadly: thinking about whether an existing rate basis is appropriate for a new product or market and assessing potential adjustments that must be considered.

Why it’s vital to regularly review your dental rating manual

Just in the last few years, we have seen industry changes that affect premium rates: state-specific minimum loss ratio rules, shifts in utilization patterns, new technologies, and more. In this ever-evolving dental benefits marketplace, regularly reassessing your rating manual will help you keep your prospective rates in line with your best expectations and the competitive landscape.

¹ Fontana, J. (August 14, 2025). What insurers need to know about California dental rate filing rules. Milliman. Retrieved December 1, 2025, from https://www.milliman.com/en/insight/insurers-need-to-know-california-dental-rate-filing-rules.

² Fontana, J., Hosein, M., Konbaz, B., & Youngblood, G. (February 17, 2025). Dental coverage in Medicare Advantage: A first look at 2025 coverage levels. Retrieved December 1, 2025, from https://www.milliman.com/en/insight/dental-coverage-medicare-advantage-2025.