Which of the following is a limited-benefit health policy?

Why A is correct

Limited-benefit policies pay stated amounts for specified events rather than reimbursing actual medical expenses. The group includes travel accident, specified disease and critical illness, hospital income and confinement indemnity, accident-only, and credit disability policies. A specified disease policy that pays a fixed amount on diagnosis fits squarely in this category. Major medical, group comprehensive, and Medicare supplement plans all reimburse actual covered expenses and are not classified as limited-benefit products, because their payments track the size of the bill rather than a contract figure.

Why the other options are wrong

• B) Major medical reimburses actual covered expenses after the deductible and coinsurance, so its payments vary with the size of the bill; that is the opposite of a limited-benefit policy.
• C) Group comprehensive coverage pays covered physician and hospital costs rather than fixed, contract-defined amounts, so it does not fit the limited-benefit classification.
• D) Medicare supplement (Medigap) plans pay the cost-sharing gaps for covered Medicare services based on actual charges, not fixed amounts per event, so they fall outside the limited-benefit class.

Memory hook

Limited = fixed check regardless of the bill. Comprehensive = pays the actual covered bill.

Why A is correct

Limited-benefit plans are classified by the nature of the benefit they promise: instead of reimbursing actual covered expenses, they pay a stated fixed amount per event or day, or a specified benefit for a named condition. Hospital confinement indemnity, specified disease, critical illness, accident-only, travel accident, and credit disability are all in this category. The limited label reflects that the maximum payment is fixed in the contract and does not rise with the actual cost of care. Classifying a product as limited versus comprehensive changes how it is sold and regulated, a distinction found in the limited-benefit classification content of the general concepts of medical and disability insurance (AH-II.4).

Why the other options are wrong

• B) A high-deductible comprehensive major medical plan is not a limited-benefit plan. After the deductible is met, it reimburses actual covered expenses up to its policy limits, whereas a limited-benefit plan pays a fixed or specified amount that does not track the actual cost of care.
• C) Medicare is a federal health insurance program for seniors and certain disabled individuals, not a classification of private limited-benefit plans. Limited-benefit products such as specified disease and accident-only policies are sold in the private market and are not governed by Medicare's benefit rules.
• D) Paying every medical expense the insured incurs without limitation describes comprehensive coverage, which is the opposite of a limited-benefit plan. Limited-benefit plans are defined precisely by their fixed maximums and specified benefit amounts.

Memory hook

Limited plan = fixed benefit check; comprehensive = pays the real bill.