Benefits Buzz

Excepted Benefits Explained

Posted on January 18th, 2017

The term “excepted benefit” is used very frequently in the health insurance industry, but several people have a hard time understanding what that term actually means. In reality, it’s not that hard of a term to understand once it’s explained in plain English. 
The easiest way to understand the term excepted benefit is to understand whether or not a particular health plan law applies. For example, we know the Affordable Care Act (ACA) applies to individual and group health plans, but does it apply to dental or vision plans? The answer is no. The ACA applies to health plans except for plans such as dental and vision plans. In other words, some plans are exempt from certain legal requirements because they provide limited or ancillary health-related coverage. These types of plans are referred to as excepted benefits. 
For a plan to be considered "excepted" it must fall into one of four categories:
1. The plan must not be considered health coverage, and examples include:
  • Disability insurance
  • Automobile insurance
  • Workers' compensation
2. The plan provides limited health benefits, is issued under a separate policy from the health plan, and must not be an integral part of the health plan. Examples include:
  • Dental insurance
  • Vision insurance
  • Long-term care insurance
  • Most Health Care FSAs
3. The plan does not coordinate benefits with a health plan, is issued under a separate policy from the health plan, and pays out benefits regardless of whether the health plan does. Examples include:
  • Cancer or critical illness insurance
  • Hospital and fixed indemnity plans
4. The plan supplements the health plan and is issued under a separate policy from the health plan. The most common example is:
  • Medicare Supplements

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