You don't lose more efficiency with higher water LEDs, as they generally just make the die bigger to accommodate more current. When we're talking about radiometric power turning to heat on a surface out the front of the LED, less efficiency would mean less radiometric power and less heat anyway.
I'm not sure where your misconception about MCPCBs comes from, but they are all insulated, that's the point of a MCPCB, and there would be no possible way to include electrical traces on top if they were not insulated. They're generally 1.5-2mm thick aluminum board, with a 2-3C/W thin electrical insulation layer, then copper on top for the electrical and thermal connections. I've soldered thousands of LEDs onto thousands of different MCPCBs, litterally thousands. There's no such thing as a non-insulated MCPCB, that would defeat the purpose of it's existence.
