15.3 Dental, Vision, and Limited/Supplemental Health Policies
Key Takeaways
- Dental plans tier coverage: preventive ~100%, basic ~80%, major ~50%, with an annual dollar maximum and preventive usually exempt from the deductible.
- Vision plans are scheduled-benefit products covering a routine exam plus allowances for frames, lenses, or contacts.
- Limited/supplemental policies (accident-only, critical illness, specified disease, hospital indemnity) cover narrow triggers and are not comprehensive.
- Indemnity plans pay a fixed dollar amount per day or event regardless of actual charges.
- AD&D pays the principal sum for loss of two members and a scheduled fraction (often one-half) for loss of one member, accidents only.
Dental Insurance Basics
Dental insurance is structured around a tiered classification of procedures that drives both coinsurance and waiting periods:
| Class | Examples | Typical coinsurance (plan pays) |
|---|---|---|
| Preventive / diagnostic | Cleanings, exams, x-rays | 100% |
| Basic | Fillings, simple extractions | 80% |
| Major | Crowns, bridges, dentures | 50% |
| Orthodontia (optional) | Braces | Often 50% to a lifetime max |
Dental plans use an annual maximum (a yearly dollar cap, e.g., $1,500) rather than the unlimited-after-deductible structure of major medical. Preventive care is usually exempt from the deductible to encourage early treatment.
Dental plans also impose waiting periods — often 6 to 12 months on major services — to discourage someone from buying coverage only after a crown is already needed. Orthodontia, when offered, typically carries a lifetime maximum separate from the annual maximum. Group dental plans may be scheduled (a fixed dollar allowance per procedure), non-scheduled / comprehensive (the percentage-coinsurance model above), or a combination. Recognizing which model is in force tells you how to compute the payout.
Dental Coinsurance — Worked Example
An insured with a $50 annual deductible and a $1,500 annual maximum has the following claims in one year:
| Service | Class | Billed | Plan share |
|---|---|---|---|
| Cleaning + exam | Preventive | $200 | $200 (100%, no deductible) |
| Two fillings | Basic | $400 | apply $50 deductible → 80% of $350 = $280 |
| Crown | Major | $1,200 | 50% of $1,200 = $600 |
- Total plan payment so far: $200 + $280 + $600 = $1,080 — under the $1,500 annual max, so all is paid.
- The insured's out-of-pocket: $50 deductible + $70 (basic 20%) + $600 (major 50%) = $720.
Trap: the deductible normally applies once per year and usually does not apply to preventive services.
A dental plan pays 100% preventive, 80% basic, 50% major, with a $50 annual deductible (preventive exempt) and a $1,500 annual maximum. The insured has $500 of basic work (deductible not yet met). What does the plan pay on this claim?
Vision Insurance
Vision plans are typically narrow, scheduled-benefit products rather than comprehensive coverage. A plan provides defined allowances on a fixed schedule:
- One routine eye exam per year.
- An allowance toward frames or contact lenses (e.g., $130) every 12–24 months.
- A covered or discounted set of lenses annually.
Vision plans usually exclude medical/surgical eye disease (that is a major-medical claim) — cataract surgery or glaucoma treatment belongs to the health plan, not the vision plan. They are sold both as employer benefits and as individual discount-style plans, and like dental they emphasize routine preventive use. Some are true insurance with copays and allowances; others are simply discount plans that negotiate lower provider prices without paying claims at all. On the exam, classify the product first: a discount plan is not insurance and pays no benefit.
Limited and Supplemental Health Policies
These fill gaps around a base medical plan. They are not comprehensive and the exam expects you to recognize each by its narrow trigger:
| Policy | What it covers / how it pays |
|---|---|
| Accident-only | Pays only for injury from an accident, not sickness |
| Critical illness / dread disease | Lump sum on diagnosis of a named illness (cancer, heart attack, stroke) |
| Specified disease (e.g., cancer) | Benefits only for the named disease |
| Hospital indemnity | Fixed cash per day of hospital confinement, regardless of actual cost |
| Limited benefit / hospital cash | Capped, scheduled payments |
| Short-term medical | Temporary bridge coverage, not ACA-compliant |
Key distinction: indemnity (fixed-dollar) plans pay a set amount per day or per event and are not coordinated with actual charges, so the insured may keep any surplus. A hospital indemnity plan paying $300/day pays that $300 whether the hospital bill is $1,000 or $4,000 — the benefit is detached from the real cost and from any other coverage. That makes these products useful supplements but dangerous as a sole plan; none of them satisfies the Affordable Care Act (ACA) definition of minimum essential coverage.
AD&D and Credit Health — Reading the Trigger
Accidental Death & Dismemberment (AD&D) pays only for losses from accidents. The full benefit is the principal sum; dismemberment pays a scheduled fraction:
- Death or loss of two members (e.g., both hands) → the principal sum (capital sum).
- Loss of one member → typically one-half the principal sum.
Worked example: with a $100,000 principal sum, accidental loss of one hand pays $50,000; loss of sight in both eyes pays the full $100,000. The schedule generally treats loss of two members, both eyes, or one member plus one eye as the full capital sum, and a single loss as half.
Credit health (credit disability) is a different gap product that makes the monthly loan payment if the borrower becomes disabled. The creditor/lender is the beneficiary, coverage cannot exceed the outstanding loan balance, and the benefit decreases as the loan is paid down. The companion credit life product pays off the balance at death. The recurring trap across all of these is the trigger: AD&D requires an accident, credit health requires disability, specified-disease requires the named diagnosis. Match the fact pattern to the trigger before picking an answer.
An insured holds a $200,000 AD&D policy. While operating machinery she accidentally loses one hand. The policy pays the principal sum for loss of two members and one-half for loss of one member. What does the policy pay?
Dental Plan Structure
Dental coverage typically tiers benefits: preventive/diagnostic (cleanings, exams) covered at or near 100% with no deductible to encourage maintenance; basic restorative (fillings, extractions) at ~80% coinsurance; and major services (crowns, bridges, dentures) at ~50%. Orthodontia is often a separate rider with a lifetime maximum. Dental plans carry an annual benefit maximum (e.g., $1,500-$2,000), the opposite of medical plans which cap the insured's cost rather than the insurer's payout.
Limited and Supplemental Health Policies
Several narrow products supplement major medical. A dread disease/critical illness policy pays a lump sum on diagnosis of a specified condition (cancer, heart attack, stroke). A hospital indemnity policy pays a fixed dollar amount per day of hospitalization regardless of actual cost. Accident-only policies cover injury but not sickness. These are excepted benefits not subject to ACA essential-health-benefit rules and may use pre-existing limitations and fixed payouts.
A hospital indemnity policy pays benefits based on: