Seeing benefits in vision care: companies are eyeing vision benefits more closely than ever before. Here’s why – includes related article
Nancy N. Bell
While many industries are struggling to break even, the managed vision care business is booming. Some vendors of vision care services report that sales have risen by more than 600% over the past five years.
A 1990 survey by Hewitt Associates, benefits consultants in Lincolnshire, Ill., shows that, in 1985, 31% of U.S. companies offered employees some type of vision coverage. By 1990, that number had nearly doubled to 61%.
Although benefits managers are reluctant to admit it, vision programs are popular in part because many companies want to distract employees’ attention from fat-trimmed total benefits, says Roger Valine, senior vice president of Vision Service Plan in Sacramento, Calif. Companies also want to soften the blow from increased hospital deductibles and other cost-sharing measures, he says. “Many companies purchase vision plans as the ‘good news’ when they’re raising deductibles or restructuring benefits,” he contends.
Other companies simply see vision as an affordable benefit that employees want. Ron Cheeley, director of corporate employee benefits for Coca-Cola in Atlanta, which covers 12,000 lives, says the company’s only reason for adding vision to its flex plan in January 1991 was to provide a requested benefit. “With vision,” Cheeley says, “we felt that for a small cost, we could deliver a good benefit.”
Mothercare Stores Inc., a maternity clothing retailer based in Secaucus, N.J., offers vision care to its 1,100 employees for the same reason. “We’re always looking for a way to add benefits,” says personnel coordinator Toni Mikulewicz. “We added vision two years ago because we could afford to offer it to all our employees.” Mothercare has 200 stores in 36 states.
When Johnson controls and Yokogawa Corp. entered into a joint venture to manufacture high-tech instrumentation in Atlanta, the resulting Johnston Yokogawa Co. blended the two benefits programs. “We found that vision wasn’t covered in either one,” says Patricia Loving, compensation and benefits analyst for the company, which has 700 employees.
The new company contracted with a vendor to issue employees discount cards for eye car. If employees purchase their glasses at the vendor’s outlets, they receive price reductions of 15% to 60%, depending on what they buy. The cost to Johnson Yokogawa is $6 per employee per year.
Regardless of why they’re offered, vision care benefits are understandably welcomed by employees. Yet some critics argue that covering routine, relatively inexpensive services contributes to the rise in health care costs. Stuart Butler, director of domestic and economic policy studies at the Heritage Foundation, a think tank in Washington, advocates that families buy health insurance with the help of tax credits and pay routine out-of-pocket expenses themselves. Health insurance, he and members of the foundation contend, should cover only catastrophic care.
Carl Moroff, senior vice president of Davis Vision, a third-party vision plan administrator in Plainview, N.Y., disagrees. Most vision plans allow employees to purchase glasses at greatly reduced prices, thereby avoiding the industry’s customarily high retail markups, he says. Preventive eyecare should be part of any overall health care program and high-quality managed vision care should not exceed 1.5% of an employer’s overall health care costs, he says.
Critics also say that vision plans tend to be costly because of high use. But Moroff calls this contention a common misconception. “Because vision care benefits are usually limited, they’re not subject to overutilization by employees,” he says. What’s more, he continues, usage patterns show that only a small percentage of eligible individuals avail themselves of the coverage. “We have 2.2 million potential users,” he says, “and fewer than 25% take advantage of their vision benefits.”
Need for vision care
Because vision care is valued highly and is a low-cost benefit, it will become increasingly popular, say others in the industry. “The demand for vision is going to be driven by demographics. The baby boom generation is getting older, so the need is going to be there. There is no doubt in my mind that we are going to see employers continuing to add these benefits,” says Dennis Osgood, vice president of vision care of Cole Vision Corp. in Warrensville Heights, Ohio, which owns and manages a network of vision care providers nationwide.
As vision plans become more popular, they’re also becoming more similar. “The differences are gradually becoming less distinct as some elements of one type become integrated with those of another,” says Kent Massey, CEO of Eye Care Plan of America, a vision-plan provider in Mesa, Ariz. Basically, plans fall into three categories: discount, traditional indemnity, and prepaid plans. “Discount plans enable users to get reduced rates on exams and glasses within a network of providers,” says Massey. “They employee pays the reduced bill directly. Traditional indemnity plans offer reimbursement to the employee by an insurance company. Employees usually can use any provider or vendor, and there is often a deductible. With prepaid plans, employees use a network of providers. The chosen provider bills the plan administrator for exams and glasses. If the plan allows employees to go outside the ntwork, the employee usually submits the bill and reimbursement is made according to a predetermined schedule. payments are usually lower for services purchased outside the network,” he says.
Managed vision plans today often cover eye exams and lenses, frames, and contacts. A typical plan allows employees an eye exam and lenses annually and frames biennially. Often, $10 co-payments for exams and $15 co-payments for glasses or lenses are required.
The essential component of all types of plans, therefore, is reduced rates. Discounts are based on two factors: first, the basic contract the employer negotiates with the vendor; and second, the amount of mark-up on eyewear purchased by the employee. The higher the mark-up, the greater the discount.
Tri-State Motor Transit Co., a trucking company in Joplin, Mo., covers 4,000 employees and dependents under its year-old vision plan. The discount card that Tri-State negotiated for employees entitles workers to reductions of 10% to 60% on purchases made at the vendor’s outlets, reports company spokesperson Cindy Mueller.
Coca-cola uses discount cards and also covers as much as $50 of the cost of an annual exam, says Cheeley.
Sharon Presutti, senior vice president of Midwest Vision Service Plan, a large national provider of managed vision care services in Oak Brook, Ill., says the discount approach to vision benefits is relatively new. In years past, vision was often added as a rider to major medical coverage and reimbursement was based on a fee schedule.
“The problem with flat-fee schedules is that many of the formulas were created in the 1950s and haven’t kept pace with costs,” explains Presutti.
Some companies, such as Coca-Cola, allow employees to pay for vision care with money from spending accounts, often as part of an overall flex plan. Employees put money aside on a pretax basis to be used to pay for vision (or other) health care expenses not covered by insurance.
Though many vendors and benefits managers say the spending account route is gaining popularity, Vision Service Plan found that of 400,000 new employee customers gained in 1991, only 11% had a flexible plan. “In other words, 89% got their vision benefits as part of the core benefits package,” says Valine.
First Community Bancorp Inc. in Rockford, Ill., which covers 330 lives, offers vision benefits as part of a program that also includes medical and dental coverage, explains Nancy Rick, compensation and benefits officer. Employees may deduct premiums on a pretax basis. The cost to employees of all three plans is based on the number of dependents.
The vision plan provides for a yearly exam and biennial materials, in or out of a network of optometrists and ophthalmologists. If the employee uses the company’s providers, there may be a $10 copayment for the exam, and a $15 copayment for materials. If employees go outside the network, they receive a flat reimbursement for their purchases. “Typically, it costs employees $2.70 per month for themselves and $5.95 for family coverage,” Rick says.
Managing vision care
Vision benefits readily blend into total managed health care programs because they’re easily monitored and managed. “Vision is delightfully predictable, without the catastrophic claims that haunt medical coverage,” says Stuart R. Schwartz, senior vice president of Block Managed Vision Care, a division of the Block Group, a Roseland, N.J., provider of vision plans.
Providers, including the nation’s 26,000 optometrists, also expect vision care to be increasingly managed in coming years. “We’re gearing up for managed care because it’s the wave of the future,” says Bill Reinertson, director of insurance programs for the American Optometric Association in St. Louis.
One trend affecting managed vision care plans is the extended role of optometrists. No longer just examining eyes and fitting patients for glasses or contact lenses, optometrists are treating a variety of eye problems. Moreover, they’re licensed to prescribe therapeutic drugs in 28 states.
The expanded role of optometrists has given rise to Vision Service Plan’s Primary Eye Care Program, which pays for treatment by optometrists of certain eye problems formerly treated only by ophthalmologists, such as conjunctivitis, in addition to performing eye exams and fitting patients with eyewear. More than 90,000 persons are covered, Valine says.
Given the widespread managed care emphasis on prevention, and the number of people who use video display terminals (VDTs), it’s not surpring that some eye care vendors offer special coverage for the computer-intensive workforce. Vision Service Plan, for instance, offers a VDT operator program.
“The coverage provides testing related to their work station demands,” say Valine. “Employees complete a form describing their workplace conditions, lighting, and any eye symptoms that may be related to their VDT operation.” Optometrists and ophthalmologists see the patient information forms. Care is based on work demands. Vision Service Plan’s program has grown from 11,000 covered employees in 1989 to 130,000 now, Valine says.
Other vendors are skeptical of such plans, noting that experts are undecided about whether close work–specifically VDT operation–leads to eyestrain and other eye problems. “This kind of work certainly can lead to stiff necks, backaches, and headached. But it has not been determined that it actually damages vision,” says Peter Barnett, vice president of managed care for Pearle Inc. in Dallas, which provides vision care services through a network of more than 1,000 optomentrists.
What is clear, though, is that many employers whose workers use computers all day are becoming more sensitive to employees’ vision care needs and desires. “Vision care is an especially important benefit for people in our industry,” notes Bob Eberhart of Official Airline Guide, a publisher in Oak Brook, Ill., of airline flight schedules and guides.
Official Airline Guide’s vision plan is similar to that of First Bancorp. One-third of its employees participate in the plan, which covers 725 lives. Eberhart describes it: “We provide a yearly eye exam and replacement of lenses and frames every 24 months. There is a $10 exam deductible and a $15 copayment for lenses and frames. Employees can choose either a panel or nonpanel optomentrist. Those who choose an out-of-network provider receive a flat-rate reimbursement and are responsible for the remaining cost.”
New buying clout
Whether they’re buying discout cards for employees’ glasses and contact lenses or total eyecare that includes exams and treatment, employers are negotiating for vision benefits as they do for other goods and services. Barnett of Pearle sees more buyers contracting directly with vendors, eliminating such middlemen as insurers, third-party administrators, and brokers. “Some companies now have inhouse benefits experts who are extremely knowledgeable about the industry. They’re saying, ‘Hey, we’re self-insured. The middleman provides only administrative services. Why can’t we buy directly from the vendor and do the paperwork ourselves?'”
Another trend is the growth of buying coalitions. When small and medium-size businesses join together to buy vision plans, they command discounts though volume buying. “You may have a coalition with more than 50,000 employees covered, but individual company size may be just 15 to 50 employees,” Barnett says.
For a small to medium-size self-insured company, a vision plan can be most attractive, given the predictable, noncatastrophic nature of vision claims. Still, recognizing that first-year use is likely to be high, some companies may prefer to pay a per-person premium to a vendor that covers all the claims and assumes all of the initial risk. Then, after several years–once such variables as the age of employees, the number of family members using vision services, and the rate of use are established–they may self-insure.
“Self-insurance usually takes from three to five years,” says Presutti. “We suggest that if a company has never had a vision plan before, it may want to let someone else take the risk until the plan stabilizes and all the variables are known,” she says.
In the case of Midwest Vision Service Plan, Presutti explains, a company that becomes self-insured would continue to use the plan’s network of preferred optometrists and thus enjoy the maximum discount. Also, Midwest would continue to administer the plan. “We would bill the company an administrative fee, plus the cost of the vision services used,” she explains.
Like others in the vision-care business, Presutti says companies are eyeing vision care carefully. So far they like what they see.
Nancy N. Bell specializes in writing about health care.
COPYRIGHT 1991 A Thomson Healthcare Company
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