When “Health Insurance” Is Not Really Insurance: The Hidden Risk Of Excepted Benefit Plans In Ohio And Kentucky

When “Health Insurance” Is Not Really Insurance: The Hidden Risk Of Excepted Benefit Plans In Ohio And Kentucky

A man in western Ohio thought he had done everything right. He enrolled in what he believed was affordable health insurance. Months later, after he reported chest pain and abnormal lab results, the company denied his claims as “pre-existing.” The policy turned out to be a limited sickness plan, not an actual Affordable Care Act Marketplace plan. Legally, the company was allowed to do precisely what it did.

Stories like his are not rare. They are hard to count, but they are not flukes.

This article explains why.

The fine print: when “health coverage” is an excepted benefit

The Affordable Care Act (ACA) transformed the individual and small-group markets. For ACA-compliant plans, insurers cannot refuse coverage, charge higher premiums, or exclude benefits because of a pre-existing condition. That protection is codified in federal law and in public-facing guidance from the Department of Health and Human Services.

Right next to that system is another one that most people never hear about. Federal regulations recognize a separate category called “excepted benefits.” These are products that are not treated as regular health insurance. The list includes coverage for only a specified disease or illness, such as cancer-only policies, and hospital indemnity or other fixed indemnity products that pay a set dollar amount per day or per service.

For these excepted benefits, the ACA’s core market reforms do not apply. The regulation at 45 C.F.R. § 148.220 states that the requirements of that part and part 147 do not apply to individual coverage that offers only the narrow benefits described in the rule. A parallel rule in 45 C.F.R. § 146.145 does the same thing in the group market.

That carve out is deliberate. Congress and federal agencies left room for supplemental products that sit atop real insurance. The problem in the real world is that these products are often sold and marketed in ways that closely resemble comprehensive coverage.

From a legal perspective, the denial in our opening story is exactly what the law allows for an excepted benefit plan. The policy can exclude pre-existing conditions and deny claims tied to them. The wrong is not only in the contract language. The problem is that many people reasonably believe they are buying full health insurance when they enroll.

Regulators have started to say the quiet part out loud

Federal regulators have spent the last few years trying to draw a clearer line between comprehensive health insurance and non-ACA products.

In March 2024, the Departments of Health and Human Services, Labor, and the Treasury issued a major final rule on short-term limited-duration insurance and independent noncoordinated excepted benefit coverage. The CMS fact sheet explains that short-term plans are excluded from the definition of “individual health insurance coverage,” meaning they are generally not subject to ACA protections, such as bans on pre-existing condition exclusions or annual and lifetime limits on essential health benefits.

The same rule tightens the duration of short-term plans and imposes stronger consumer notices. The stated goal is to help people “clearly distinguish” between short-term coverage and comprehensive insurance so they do not enroll in short-term coverage as a long-term substitute.

The rule also adds new notice requirements for hospital indemnity and other fixed indemnity products that qualify as excepted benefits. CMS states that when these products meet specific payment standards, they are not subject to the federal requirements or consumer protections that apply to major medical coverage.

The National Association of Insurance Commissioners puts it more bluntly in a consumer-facing paper: excepted benefits are not comprehensive major medical insurance.

In other words, regulators know there is a gap between what these products actually do and what many people believe they are buying. That is why the new disclosure regime exists.

Millions of people are in these plans.

Short-term and excepted-benefit products are not fringe curiosities. They are a significant slice of the market.

A 2025 study in JAMA Network Open by American Cancer Society researchers examined state policies on short-term, limited-duration insurance and late-stage cancer diagnoses. Using national data from 2016 through 2020, the authors estimated that enrollment in short-term plans grew by about 27 percent after a 2018 federal rule expanded their duration, from roughly 2.36 million people in 2018 to about 3 million people in 2019.

Those numbers count only short-term plans. They do not include people in fixed indemnity or specified disease policies. Federal guidance and compliance summaries make clear that all of these products, when they meet the regulatory criteria, are treated as excepted benefits and are not subject to ACA market reforms.

When you combine those categories, you are talking about millions of people nationwide who are covered. However, you can still have pre-existing conditions excluded, have benefits capped, and have entire categories of care omitted.

The harm is measurable, not theoretical.

One of the strongest signals that these products cause real harm comes from cancer outcomes.

In the JAMA Network Open study mentioned above, researchers examined more than 1.2 million adults aged 18 through 64 with newly diagnosed cancer. They compared states that allowed short-term plans with few extra protections to states that continuously prohibited them. After the 2018 expansion of short-term plans, states that allowed these plans without strong restrictions saw a net increase of about 0.76 to 0.84 percentage points in late-stage cancer diagnoses compared with the prohibition group.

A companion analysis from the American Cancer Society summarized the findings in plain language. The press release states that short-term plans “do not provide comprehensive coverage” and can leave people who are diagnosed with serious diseases “with catastrophic costs.” It notes that the 2018 federal policy loosening restrictions on these plans was associated with more advanced cancer diagnoses in states that did not move to ban or tighten them.

Other research in the oncology literature has found that states that restrict or prohibit short-term plans see modest increases in early-stage diagnoses compared with states that leave these products largely unregulated. Taken together, these findings show that when non-ACA plans are widely available, enough people rely on them instead of comprehensive insurance that serious illnesses are diagnosed later and cost more to treat.

Short-term and fixed indemnity coverage may look cheap at the point of sale. When cancer, heart disease, or another major condition arrives, the limits become very real.

What Ohio’s regulators are seeing

Ohio permits the sale of short-term, limited-duration insurance. The Ohio Department of Insurance issued Bulletin 2018 05 to clarify the rules for insurers offering these policies.

That bulletin does several important things:

• It adopts the federal notice requirement and requires that the warning appear in at least 14-point type in both the contract and any application materials.
• The model notice tells consumers that the coverage is not required to comply with the ACA, may contain pre-existing condition exclusions, may have lifetime and annual dollar limits, and may not cover hospitalization, emergency services, maternity, preventive services, prescription drugs, or mental health and substance use treatment.
• It reminds insurers and agents that marketing must comply with Ohio’s Unfair Trade Practices Act and advertising rules. The bulletin gives a concrete example of problematic language that describes waiting periods and pre-existing limitations in a way that appears to present them as benefits rather than restrictions.

Independent consumer resources estimate that several insurers are actively selling short-term plans in Ohio and that the state imposes limits on term length and renewals. However, those limits do not make the products ACA-compliant.

The Ohio Department of Insurance also highlights in its public-facing materials that it regularly handles complaints involving sales practices, misrepresentation, and benefit disputes across health lines. The Attorney General’s office reports tens of thousands of consumer protection contacts each year across all industries, including false or misleading advertising.

What Ohio does not publish is the precise subset of those complaints that involve short-term or excepted benefit plans sold to people who thought they were buying ACA-level coverage. The patterns are visible in the guidance. The numbers are not.

What Kentucky’s regulators are seeing

Kentucky has taken a similar approach. The Kentucky Department of Insurance has issued both a bulletin on individual short-term limited-duration policies and a separate consumer alert and buyer’s guide.

The consumer alert is unambiguous:

• Short-term plans are designed to fill temporary coverage gaps, such as between jobs.
• They are not ACA-compliant and do not have to follow ACA market reforms.
• They can charge higher premiums based on health status.
• They can exclude pre-existing conditions and impose annual or lifetime limits.
• They can omit entire categories of benefits, including mental health, maternity, and prescription drugs.
• They do not count as minimum essential coverage and do not qualify for ACA premium tax credits.

The Department warns consumers to use caution when handling these products. It urges people to verify that the company and agent are licensed, to be careful with internet sales, to use the free look period to read the policy, and to remember that oral promises are not part of the contract.

There is no public database that provides a clean count of how many Kentuckians are in short-term or fixed indemnity coverage, or how many have experienced claim denials like the chest pain example at the start of this article. What the state has done instead is publish clear warnings and incorporate federal rules that shorten the allowable terms for new short-term contracts.

So how often does this kind of harm happen here?

Here is the most honest answer for Ohio and Kentucky.

What we know

• Federal law explicitly permits excepted benefit products, including specified disease, hospital indemnity, and fixed indemnity policies, and exempts them from ACA market reforms.
• The ACA’s pre-existing condition protections apply to comprehensive major medical coverage, including Marketplace Qualified Health Plans, not to excepted benefits.
• Both Ohio and Kentucky allow short-term plans and other excepted benefit products to be sold within their borders.
• Federal and state regulators have issued bulletins, consumer alerts, and new notice rules stressing that these products are not comprehensive insurance and should not be used as a substitute for real coverage.
• Nationally, enrollment in short-term plans alone reached about 3 million people after the 2018 expansion, and that figure does not include fixed indemnity or specified disease policies.
• Peer-reviewed research links expanded availability of these plans to higher rates of late-stage cancer diagnoses in states that allow them without strong extra protections.

All of those points point to a common pattern rather than a rare event.

What we do not know

• No Ohio or Kentucky agency currently publishes data that cleanly answers the question “How many residents bought an excepted benefit or short-term plan, believed it was full health insurance, and later had claims denied because of pre-existing condition exclusions or benefit gaps?”
• Public complaint statistics are not broken down in a way that identifies those consumers as a separate group.

Any specific number would be guesswork. As a matter of ethics and accuracy, it is better to say that the pattern is clearly present and serious, without inventing a tally that does not exist.

How to protect yourself and what to do if this happens to you.

If you are shopping for coverage in Ohio or Kentucky, a few practical rules help:

1. Ask directly whether the plan is ACA-compliant major medical coverage.
   Marketplace plans and other ACA-compliant policies must cover pre-existing conditions and essential health benefits. Excepted benefit plans and short-term policies do not.
2. Look for the word “excepted” or “short term” in the fine print.
   If the brochure or policy calls itself a specified disease policy, hospital indemnity coverage, fixed indemnity coverage, or short-term limited duration insurance, treat it as a supplement at best, not your primary health insurance.
3. Insist on seeing the full certificate or policy before you enroll.
   Marketing sheets and verbal explanations are not the contract. The exclusion pages are.
4. If you receive a denial that surprises you, get help early.
   A lawyer who handles health coverage denials in Ohio or Kentucky can review the policy, sales materials, and denial letter to determine whether the policy was sold misleadingly, whether internal appeals or external review are available, and whether there is a basis for a regulatory complaint or a lawsuit. Speaking with a lawyer does not guarantee an outcome, but it can help you see your options clearly.
5. If you think you were misled, keep every document.
   Save screenshots, emails, texts, and recordings if you have them. They are often the only way to show what you were told at the time of sale.

What the law does make clear is that if a plan is labeled an excepted benefit or a short-term limited duration product, it does not carry the same protections as an ACA-compliant policy and will behave very differently when real illness arises.

For many families in Ohio and Kentucky, the hardest part of that lesson is that they only learn it after the first big bill arrives.

DISCLAIMER: This blog post is intended for informational purposes only and is not legal advice. The information given should not be relied on as a substitute for obtaining legal advice from an attorney licensed to practice in your area. Reading this blog post or contacting our firm through this website does not create an attorney-client relationship. Every case is unique, and past results do not guarantee or predict future outcomes. Individual results may vary based on the specific facts, jurisdiction, parties involved, and other factors relevant to your situation.

ATTORNEY ADVERTISING: Frank M. Mungo, Attorney at Law. Office: 7310 Turfway Road, Suite 550, Florence, KY 41042 (859-372-6670). The choice of a lawyer is an important decision and should not be based only on advertisements.