The vision care plan industry’s vertical monopoly
Vision care plans have become the bullies of ECPs, independent labs, and consumers
Editor's note: This piece is a guest perspective, and it appears in the "Opinion" section of our publication.
There is no question that certain vision care plans have dominated the eyecare market for the last two decades. Nearly 100 million Americans are covered by just two of these plans.1,2 As they have become dominant and integrated into new lines of business, they increasingly are coercing optometrists, ophthalmologists, independent laboratories, and consumers—the result higher prices, less choice, and reduced competition.
The most significant antitrust case against a vision care plan comes from nearly 20 years ago. In 1996, the Department of Justice Antitrust Division filed its only lawsuit against Vision Service Plan (VSP).3 The Department of Justice alleged that the “nation’s largest vision care insurance plan” was reducing price competition through “most favored nation” clauses, a contracting provision designed to ensure that VSP would get the most favorable rates from providers, thus reducing fees to competing vision care plans. While seen as a victory by the agency, the parties settled the matter by limiting only certain VSP conduct, including the usage of most favored nation clauses. The settlement agreement expired after five years in 2001.
Controlling every step of production
Since that 1996 case, vision care plans have faced limited scrutiny and have expanded the scope of their businesses through vertical mergers and contractual arrangements. Large plans such as Davis Vision, EyeMed (Luxottica), and VSP have acquired or opened retail stores, laboratories, and frame manufacturers, granting them control of the entire chain of vision care production. To quote Luxottica, such vertically integrated structures are “one of the competitive advantages underpinning the Group’s past and future successes.”4 These transactions have received limited attention from the federal antitrust agencies. In fact, the federal government has approved recent transactions without a full assessment of the likelihood of anticompetitive harm.5 Yet, as noted in a 2012 Bain & Company report on independent optometry, vision care plans are purposefully applying pressure to independent eyecare providers through “aggressive… marketing strategies.”6 The reason? To increase plan profits by forcing consumers into a vertically integrated monopoly.
According to 2008 report by Consumers Digest, such aggressive tactics and vertical integration by vision care plans “could present problems to consumers”7 by limiting choice, lowering quality, and raising prices. One of the most common practices is the restriction of services an independent eyecare provider may offer. Patients of certain vision care plans are allowed to select an independent optometrist or ophthalmologist for their examination; however, that eyecare provider may be prevented from providing lenses, frames, or contact lenses to that patient. And the eyecare provider may be limited to only using the vision care plan’s laboratory. The patient is forced to make these secondary purchases through an entity owned or controlled by the vision care plan, regardless of the patient’s or doctor’s preference. Such practices restrict choice and can often cost consumers more money. Along with limiting choice, vision care plans are also specifically targeting independent providers’ patients. Some plans are directly contacting patients in an effort to switch them from their independent eye doctor to plan-employed or plan-associated eye care professionals and locations.
The vision care plans’ conduct can also reduce competition. Before consolidation and vertical integration, providers could offer plan beneficiaries a wide range of vision care services and secondary sales. With vision care plans consolidating power and forcing patients into an integrated system, these plans are effectively restricting the ability of independent providers to provide routine vision care, laboratory services, or secondary sales to plan beneficiaries.