Hello, if this was an Aflac plan for short term disability or accident insurance and paid with after tax dollars, then the payout is not taxable unless it is considered medical reimbursement--which you already know. The question is whether or not the payout is considered reimbursement---without knowing the terms of the policy I can't determine that. However, based on what you are describing, it does not seem so, especially if you did not have to provide itemized bills to Aflac, and they did not label the payment as a reimbursement of medical expenses.
Please see page 17 under "cost paid by you" for reference:
Again, from what you are describing, it sounds like this is not a medical reimbursement, but a payout of insurance for the incidence of being hospitalized. I don't know what type of policy you have, but Aflac has a hospital confinement indemnity policy, and the proceeds are based on the length of stay but are meant for the policy holder to use them as he or she sees fit. This could include using them for expenses which would otherwise not be deductible, and therefore they would not be taxable and would not reduce a deductible expense.
Since I cannot see your actual paperwork I can only give you the basics of whether the money would be used to reduce medical deduction. If you are still unsure, the best thing to do would be to ask Aflac if any of the payout represents specific reimbursement of medical expenses. If not, then you do not need to reduce your medical expenses by this amount.
Whether or not they report it to the IRS is not the issue.
If the money can be used for whatever you like and is not "earmarked" by Aflac as a medical expense reimbursement, then I would not reduce your medical expenses by this amount.