So You Want To Sell Vision Care Plans
What do Pizza Hut, North American Van Lines, Cunard Ship Lines, Coca Cola, Warner Lambert, Hershey Foods, International House of Pancakes and the Government Employees Hospital Association have in common? They have all added vision care plans or enhanced existing vision plans for their employee benefits over the last two years, much to the delight of the brokers/agents servicing their accounts.
Lest anyone be misled by the recent flurry of interest in vision care benefits and programs, this highly affordable, much appreciated benefit is not new. For more than 30 years, vision care has been available to the labor force and general public in one fashion or another, (i.e., prepaid plans, safety-glass plans, traditional indemnity insurance plans, and as part of medical reimbursement plans). However, vision care has held the lowly status of stepchild within the family of employee benefits.
Due to the relatively low-risk exposure represented by individual or group vision care, employers paid little attention to providing a formal benefit plan to address this employee/family need. And due to the relatively low commissions associated with vision care plans, brokers and agents have not had the incentive to actively promote vision care plans. Only when all of the higher priority issues (medical, life, disability, dental, pharmaceutical, pension/profit sharing, vacation, etc…) were covered was vision care given a serious look by both employers and the brokerage community.
Vision care coverage grew through the 1960s and 70s, primarily through Taft-Hartley group trusts and other union-sponsored, collective bargaining arrangements. These programs tended to benefit employees working for the larger, Fortune 500 type companies. The Commission scales on vision care products are comparable to other health products. However, do not be misled into thinking that because the total sales volume on vision products is less than the sales volume generated by a major medical product, your commissions will not justify your efforts. Many brokers/agents are generating consistent six figure incomes on vision sales alone.
Enactment of Medicare and Medicaid in 1965 included some vision benefits for certain economically distressed categories and individuals over age 65. Even in the early 1980s, less than 18 percent of the work force had any vision care benefits.
However, in the mid 1980s, an interesting phenomenon driven by the convergence of three powerful forces began to occur. The convergence of these forces dramatically altered the way health care plans (and more specifically, vision care plans) would be sold in the future. Those three forces were:
1) The 1980-82 recession
2) The three year health insurance profit/loss cycle
3) The first wave of the Baby Boom generation reached age 40
Taken individually, none of the three forces noted above is extraordinary. Generations of Americans have experienced economic cycles in the past, and future generations will have their turn on the same roller coaster. Health insurance rates have risen consistently ever since the introduction of the first hospital service association plan, the Baylor University Hospital Plan, in 1929.1 And people turn 40 every day, that magic age when a condition known as presbyopia begins to develop. (As people grow older, they become farsighted due to the loss of elasticity in the lens of the eye, and therefore loss of ability of the eye to bulge to accommodate for near vision 2). To repeat, taken individually, none of these three factors are particularly noteworthy; however, mixed together, they created a revolutionary change in the way vision care plans were perceived within the employee benefits community.
As the cost of health care continued to rise in the 1978-1981 insurance underwriting cycle, many insurance companies opted to withdraw from the marketplace. Those that remained were challenged to retain their policyholders while passing on 30 to 200 percent annual rate increases. Many employers rode out the rate increases while passing these increased costs on to the ultimate consumer in the form of higher prices for goods and services. Some employers migrated to the newer, lower-cost HMO programs being developed. Others simply dropped their carriers and began “self-insuring” their employees. In any case, the cost of employee benefits was still calculated into the cost of goods/services sold. In a strong economy, where supply and demand are in equilibrium, this cost transference mechanism is sustainable. However, during the recession of 1980-1982, this system failed. Costs could not be transferred or absorbed when products were sitting on the shelf because demand had dried up.
One interesting development during this recession period was the increased attention devoted by human resource managers to the cost of the total benefits package relative to payroll and other benchmark financial ratios. As companies began the downsizing and/or reorganization process, it became clear that the employee benefits cost factor had quietly become one of the largest cost factors in the entire budget. (A United States Chamber of commerce study in 1991 put the cost of employee benefits upwards of 40 percent of corporate payroll in America(3) Instead of continually passing these costs on to customers through higher prices, corporate America was forced to begin “managing” these costs. Various mutations of managed cost (evolving into managed care) have included, but are by no means limited to HMOs, PPOs, deductibles on medical plans, increased deductibles, co-pays, employee cost-sharing of premiums, scheduled benefits, precertification, utilization/concurrent review, retrospective review, peer review, quality assurance, cafeteria plans, minimum premium, partial self-insurance, self-insurance, and the ultimate in managed cost: elimination of benefits altogether.
As stated previously, vision care, the stepchild of the benefits family, had always been an afterthought.
Ironically, the 1980-82 recession and subsequent focuses on downsizing and managing benefits was occurring on the eve of the greatest jump in demand for ophthalmic goods and services in history – the first wave attack of presbyopic baby boomers – those born in 1945-46. According to American Demographics Magazine, as the baby boom generation ages there will be one million new entrants into this presbyopic category every year from now until the year 2011. The increase of the presbyopic baby boomers, coupled with the extended life expectancies of their parents (98.6 percent of whom require visual correction aids) has created one of the true growth industries for the balance of the 1990s. There is much empirical data available on this already as evidenced by those companies mentioned at the beginning of this article. Certain managed vision care organizations and specialty vision PPOs have proven adept at keeping client costs below the general inflationary trends, and substantially below the health care inflationary trends over the last five years. These plans utilize a broad spectrum of benefit designs engineered to meet the objectives of a diverse clientele, i.e., school districts, municipalities, unions, large Fortune 500 companies, small companies, financial institutions, associations, etc.
Discount card access plans have grown dramatically in the last few years. These plans typically enable an employee/ member to access a provider network to realize savings on frames and lenses, including contact lenses. Because there is no insurance or risk transfer element in this design, the cost is exceptionally low, ranging from $6 to $12 per year per employee. This type of plan is easy to install and easy to administer and therefore very popular with brokers and employers interested in a “first generation” vision plan. Variations on this basic theme allow for routine eye examinations along with the optical discounts. These plans can be designed within the budget constraints of the employer by managing the frequency within which employees are allowed to use their benefits, (i.e., once every 12 or 24 months) and by scheduling the level of reimbursement for exams, frames and lenses, (i.e., $40 for exams; $30 for frames, $30 for lenses, etc.). These types of plans are also quite affordable, ranging in cost from $2 to $12 per month per employee.
Commission scales on vision care products are comparable to other health products. However, do not be misled into thinking that because the total sales volume on vision products is less than the sales volume generated by a major medical product, your commissions will not justify your efforts. Many brokers/agents are generating consistent six figure incomes on vision sales alone. One TPA we know of told us that its vision fee income kept it afloat after it had lost its primary carrier for its health plan. Depending on your existing book of business, vision plan fee-income could represent a substantial part of your future revenue.
Choosing A Vision Plan To Sell
How does a broker/agent know which vision plan is the right one to work with? Each broker/agent must answer that question within the context of their own client base and needs, budget constraints, and administrative objectives. Some guidelines might be helpful:
- Does the vision plan have adequate geographic representation?
- Does it operate nationally, regionally, or locally?
- Does the vision plan use quantifiable cost control formularies? Is the formulary discounted fee for service? Cost-plus? Retail discount?
- Are there valid quality control and quality assurance mechanisms in place?
- Is member satisfaction guaranteed? Is there an easily understood grievance/ audit procedure to follow?
- Are customer service and administrative support mechanisms easily acces- sible and user-friendly?
- Are all marketing materials, brochures, ID cards, and provider directories concise, easy to understand and professionally prepared?
- Are commissions paid accurately and promptly?
- Are MIS systems compatible so as to support seamless data transmission and reporting requirements?
- Has the vision plan consistently delivered what it is supposed to deliver? Is there a substantial referral base of satisfied clients?
These are just a few guidelines that may help in your analysis of vision care plans. Customer satisfaction surveys have uncovered others such as simplicity, integrity, quality and economy. That is what brokers/agents say they are looking for in their benefit plans. If these factors exist, we have found that contrary to popular belief, employers are not eliminating benefits such as vision care, but are in fact increasing the use of such plans. What is being eliminated is waste, duplication, inefficient and ineffective plan design and administration. Employees want/need vision benefits. Employers want/need value for the benefit dollars spent. Those brokers/agents that are properly prepared to address the needs and concerns of their clients will find abundant sales opportunities for vision care.
1. Gregg DW, Lucas UB. “Origins of Group Medical Expense Insurance.” Life & Health Insurance Handbook, Richard D. lrwin. Inc., 1973.
2. Anthony CP, Kolthoff NJ, physiology of vision, Textbook of Anatomy and Physiology, C.V. Mosby Company 1971: 252.
3. U.S. Chamber of Commerce. Annual Report on Employee Benefits Costs-1991.
Paul J. Disser is Chairman and Chief Executive Officer of Spectrum Vision Systems, Inc., a Kansas City based PPO with more than 3,600 independent optometrists under contract servicing over 3.75 million members in the Preferred Vision Care and Preferred Vision Care Plus Plans throughout the United States. He serves on the board of directors of the Mass Marketing Insurance Institute ((MI2)) and is currently President of MI2. He is also a member of the National Association of Health Underwriters (NAHU), the American Association of Preferred Provider Organizations (AAPPO), the American Management Association, and the American College of Healthcare Executives (ACHE). Disser can be contacted at 7101 College Boulevard, Suite 520, Overland Park, KS 66210. Telephone: 913-451-1672.