15.3 Dental, Vision, and Limited/Supplemental Health Policies
Key Takeaways
- Dental plans group services into preventive, basic, and major tiers, often with rising coinsurance and an annual maximum.
- Vision plans cover routine exams and corrective hardware on a scheduled or allowance basis with frequency limits.
- Limited-benefit policies (dread-disease, hospital indemnity, accident-only) pay fixed or specified amounts, not comprehensive coverage.
- Accidental Death and Dismemberment (AD&D) pays a principal sum for death and a capital-sum schedule for losses.
- Supplemental policies coordinate with, and never replace, a comprehensive major-medical plan.
Dental Insurance
Dental plans are usually scheduled or comprehensive and group covered procedures into three tiers. A common design uses declining coinsurance to steer members toward prevention.
| Tier | Examples | Typical Plan Pays |
|---|---|---|
| Preventive/diagnostic | Cleanings, exams, X-rays | 100%, often with no deductible |
| Basic | Fillings, extractions, root canals | 80% |
| Major | Crowns, bridges, dentures | 50% |
| Orthodontia | Braces (often a separate rider) | 50% up to a separate lifetime max |
Dental plans cap reimbursement with an annual maximum (often $1,000-$2,000) rather than the stop-loss/out-of-pocket maximum used by medical plans. The order is reversed: medical caps the member's spending, dental caps the insurer's payout.
Worked Example: Dental Coinsurance and Annual Maximum
A plan has a $50 deductible, pays preventive at 100%, basic at 80%, major at 50%, and a $1,500 annual maximum. In one year a member has a $200 cleaning (preventive), a $500 filling (basic), and a $2,000 crown (major).
- Cleaning: preventive, 100%, no deductible -> plan pays $200.
- Filling: apply the $50 deductible first ($500 - $50 = $450), then 80% -> plan pays $360.
- Crown: 50% of $2,000 = $1,000, but the annual maximum is now nearly used.
- Plan has paid $200 + $360 = $560 so far; remaining max = $1,500 - $560 = $940.
- The crown's $1,000 coinsurance is capped at $940.
- Total plan pays: $1,500 (the annual maximum). The member absorbs the rest.
A dental plan pays basic services at 80% after a $50 deductible. A member has a $600 covered filling and has not yet met the deductible. How much does the plan pay?
Vision Insurance
Vision plans are typically scheduled (a fixed allowance per service) and emphasize routine care that medical plans exclude. Coverage commonly includes:
- Routine eye exams once every 12 months (often a small copay).
- Lenses every 12 months and frames every 12-24 months, up to a dollar allowance.
- Contact lenses in lieu of glasses, also on an allowance.
Vision plans use frequency limitations ('one exam per 12 months') rather than coinsurance. Anything above the allowance is the member's responsibility. Medical eye conditions (cataract surgery, glaucoma treatment) belong to major medical, not the vision plan, a frequent exam distractor.
Accidental Death and Dismemberment (AD&D)
AD&D pays only for losses caused by accidental bodily injury, never illness. Two key terms:
- Principal sum — the full face amount, paid for accidental death or for losses such as both hands, both feet, or sight of both eyes.
- Capital sum — a percentage of the principal sum (often 50%) paid for a single loss, such as one hand or sight in one eye.
| Loss | Benefit |
|---|---|
| Accidental death | 100% principal sum |
| Loss of two limbs / both eyes | 100% principal sum |
| Loss of one limb / one eye | 50% (capital sum) |
Worked example: A policy with a $100,000 principal sum pays $100,000 for accidental death and loss of two limbs, but only the $50,000 capital sum for loss of one hand. Double indemnity riders on life policies use the same accidental-death logic.
Limited-Benefit and Supplemental Policies
These products fill narrow gaps and must never be sold as comprehensive coverage. The exam tests whether the producer recognizes the limitation.
| Policy | What It Pays |
|---|---|
| Dread (specified) disease | A benefit only for a named illness, e.g., a lump sum on a cancer diagnosis |
| Hospital indemnity | A fixed dollar amount per day of hospitalization, regardless of actual charges |
| Accident-only | Benefits for injuries from accidents, nothing for sickness |
| Critical illness | A lump sum on diagnosis of a covered condition (heart attack, stroke) |
| Short-term medical | Temporary bridge coverage, not ACA-compliant |
Exam Tip: A hospital indemnity plan paying $300 per day pays $300 whether the room costs $300 or $3,000. It is a fixed-indemnity benefit, not reimbursement, and it does not coordinate with the actual bill.
An insured holds a hospital indemnity policy that pays $250 per day of confinement. She is hospitalized for 6 days with total charges of $18,000. How much does the indemnity policy pay?
Critical Illness and Hospital Indemnity Plans
Critical illness insurance pays a lump-sum cash benefit on diagnosis of a covered serious condition (heart attack, stroke, cancer, kidney failure). The benefit is paid regardless of actual medical costs and is the insured's to spend on any purpose.
Hospital indemnity (hospital confinement) insurance pays a fixed daily/weekly amount for each day of hospitalization, again independent of the actual hospital bill. Both are supplemental they pay in addition to, not instead of, major medical and are valued for covering deductibles, lost income, and non-medical costs.
| Plan | How It Pays | Triggered By |
|---|---|---|
| Critical illness | Lump sum | Diagnosis of a listed condition |
| Hospital indemnity | Fixed amount per day | Hospital confinement |
| Dental/vision | Scheduled or coinsured up to a max | Covered service |
A hospital indemnity policy pays benefits based on:
Why Limited Plans Are Not Major Medical
Limited and supplemental policies (dental, vision, AD&D, critical illness, hospital indemnity, cancer-only, dread-disease) are narrow by design. They are not minimum essential coverage under the ACA and do not satisfy a need for comprehensive health insurance.
Key consumer-protection themes the exam tests:
- Producers must not present a limited plan as a substitute for major medical.
- These policies commonly have waiting periods, scheduled benefits, and annual maximums (dental often $1,000-$2,000/year).
- AD&D pays for accidental death or specific losses only; the principal sum is the full death benefit and a capital sum is a scheduled fraction for losses like a single hand or eye.
Trap: Dental and vision typically have low annual maximums; once the cap is hit, the insured pays 100% of additional costs that year.