Like most Americans, I own a car. I pay for insurance to protect myself from the economic risk associated with an accident, theft, fire, etc. Were I to have the misfortune of such an event, my insurance would cover various costs beyond that of my deductible. I have the largest deductible available as I figured out long ago that “self-insuring” first dollar coverage would rapidly cover the risk associated with the higher deductible.
What I am NOT insured for is tune-ups, oil changes, tires and other forms of routine maintenance. That’s a “scheduled” cost, which comes up periodically. It’s the cost of owning a car. While there are a few offerings for pre-paid maintenance plans for autos, they’re commonly thought of as rip-offs and unnecessary. Why? In simple terms, these are costs that arise at a set time or as a result of routine use of my vehicle. The only reason that I would have such insurance, were it even available, would be for significant savings above the cost of the premium. The reason that this doesn’t routinely occur is that competition among auto maintenance providers is pretty stiff and the market reasonably dictates the cost of such services. For the typical car owner, such routine services involve an investment of only a couple hundred dollars a year. That amount of risk doesn’t warrant insurance.
One buys insurance to protect against a catastrophic event of significant economic impact. One doesn’t insure against routine scheduled events like an oil change. Hold that thought.
50 years ago, when optometrists were basically refractionists (before medical optometry and access to health plans), most patients who had a medical eye condition went to an ophthalmologist for service. Optometrists referred patients to ophthalmologists for medical eye care. Ophthalmologists would either charge the patient’s health plan or the patient directly for the service associated with the “risk” of a medical eye condition.
“Organized Optometry”, in an effort to gain a captive audience for refractive eye care and eyewear and establish a beachhead against retail chains, started this phenomenon called “vision plans.” In simple terms, this more resembled a pre-paid service with a schedule of benefits driven mainly by time (an annual or biennial eye exam and a discount on eyewear) then insurance against a catastrophic event. In reality, the strategy was developed to fill the seats of optometrists in private practice in an effort to ward off the market erosion of the “commercialists.” Yes, Pre-Paid Vision Plans help “fill the chair.” As a result of the deep discounts accepted by providers in exchange for the hope of volume, a lower cost service is provided to the consumer; an appealing and relatively low cost benefit is available for employers; and the vision plan sponsors make gobs of money (I know, I used to be in that business).
Today, a significant portion of the eyecare using population is covered by pre-paid vision plans. Indeed,
VSP alone claims better than 50 million covered lives. For many optometrists, more than 75% of patients have coverage by a pre-paid plan (outside of the patient’s health plan). Yet, in a recent pressrelease, the Vision Council of America (of which I’m a member) announced the findings of a recent study (which I have not yet read) calling for increased utilization by employers of pre-paid plans. The article reported that “two-thirds of Americans say they would be more willing to get an eye exam if they had some coverage…” Wait a minute…my guess is that better than two-thirds of Americans would be willing to get more frequent oil changes, change their tires, drink more coffee, eat out more in restaurants, even go to the gym…”if they had more coverage.” The release went on to say…”yet only 17 percent of employers report offering vision insurance. Vision benefits lag behind health and dental benefits, with as many as 44 percent of employers offering dental coverage.”
I, for one, find this a very dubious statistic. One can reasonably conclude that virtually every individual covered by a pre-paid vision benefit is also covered by some form of health insurance. Hold that thought.
Optometry’s scope of practice; their access to health plans; and the insurance marketplace in general have changed. According to my “mother-in-law research”, a significant percentage of patients coming in for a routine eye exam (many covered by a pre-paid vision plan) can be found to have a “medical diagnosis” (covered by a health plan). What this means to me is that virtually every vision plan member has double coverage…medical coverage to handle the “risk” associated with a medical diagnosis (read “accident”) and pre-paid coverage to handle a routine eye exam (read “oil change”). Given reimbursement levels for these pre-paid vision plans, it is clearly in the best interest of the provider to move the patient off of their pre-paid vision plan to their medical insurance. And this move is a routine occurrence.
There’s another element to ponder in all this, and that’s the impact of Heath Savings Accounts (HSAs) and other self-directed pre-tax health accounts. According to a recent Cedent report, HSAs will grow at a rate of 40-50% per year through 2012, resulting in over 12 million such accounts in the U.S. I, for one, am a huge fan of HSAs and moved my firm’s insurance to a high deductable HSA some three years ago. The result has been fantastic. Not only is my firm saving significant costs, but my employees now receive the money formerly going to the insurance company. And with HSAs and their like, every person has vision coverage…and dental coverage…and hearing aid coverage, etc. And our providers of choice (our local Cleinman Performance Network Members) have provided our employees with a direct “discount plan” to help leverage their HSA savings…with no claims to file and no paperwork. Further, whether our employees use their funds for such coverage is their choice and many of them are staring at account balances already exceeding many thousands of dollars. Do HSAs and other self-directed accounts eliminate the value of pre-paid vision plans?
My understanding is that most patients are generally NOT aware that their medical insurance, whether indemnity or HSA, actually has an eye care benefit. Further, given the complexities of most pre-paid plans, patients have little understanding of plan benefits to begin with and a great deal of staff time is devoted to researching and informing the patient as to what their particular plan (of which there are hundreds of iterations) covers. Further, my guess is that most employers aren’t aware of this fact, either. Health insurers are not motivated to educate the HR directors and leaders of their customers about this fact because that would increase the cost shift of eye health exams (with a medical diagnosis) to them, away from the pre-paid vision and eyewear benefits plan. Certainly pre-paid vision plans don’t want employers to know that this cost shifting is going on, as they make more money with lower utilization.
Now, Pre-Paid Plan sponsors will claim that their plans allow access to providers by consumers at lower cost. But, wait a minute. Many retailers provide just such access. If a patient truly desires to invest $39 in an eye exam and a like amount in eyewear they can. And this category of patient certainly takes advantage of these opportunities. And most quality providers have long ago fought, and won, the battle against deep discounters of eyewear.
Consider the delivery costs associated with pre-paid plans vs. the benefit. Certainly pre-paid reimbursements haven’t kept up with providers’ cost inflation. Certainly most medical plan insurance provides better reimbursement then that of pre-paid vision plans. What are the direct costs associated with these vision plan discounts? What does it cost to file claims; educate patients about plan benefits; suffer the service issues associated with delayed eyewear from plan labs; wait for your money? Is it worth it? Are there other ways to attract and keep patients?
And are employers actually being ripped off with such plans? Are the risks of vision care costs generally covered by their health plan? Are pre-paid vision plans nothing more than a maintenance agreement covering that routine “oil change.” Is vision care at such a cost level that it really warrants insurance?
Or do all of these pre-paid plans, discounts, BOGO, etc. simply send the message that our products are overpriced to beting with?
Has optometry’s scope of practice and improved access to medical plans outstripped the usefulness of pre-paid vision plans for employers and providers alike? As a provider, is it time to consider dropping out of these panels?
There’s no doubt that increasing society’s understanding of the importance of routine eye health exams is important and valuable to both patients and our health care system. But do Americans really need additional vision care coverage in the form of pre-paid plans? Or are they more in need of better understanding of what their existing health plans cover? Should organized optometry be studying this phenomenon? Should providers be meeting with the HR departments of their local employers to educate them?
Is there an opportunity in all this or am I suffering from CDS (Clue Deficiency Syndrome)?
It's definitely important to research your options and make the best choice for your needs.
Posted by: Insurance | December 16, 2008 at 04:34 PM