Most Americans don’t understand much about their medical insurance plans beyond the painfully obvious: those plans are loaded with fine print, bureaucratic red tape, apparent contradictions, and hidden costs. It’s also painfully obvious that those plans are intentionally designed that way, creating confusion for patients while insurers rake in major profits by creating hurdles to getting the best possible care. For proof of how insurers have rigged the system at the expense of patients and healthcare providers, look no further than the vision insurance market, where insurance plans have quietly crafted a system that gives them maximum profits along with complete control over decisions made by patients and doctors.
A visit to the optometrist is typically a straightforward positive experience--getting an eye exam, consulting with your doctor about eye disease and sometimes selecting new glasses. Beneath the surface, however, insurers have inserted themselves into every step of this process. When a patient buys glasses, their insurance plan covers a portion of the cost. The patient might not realize, though, that a large sum of their out-of-pocket payments is also likely going back to their insurance plan.
The vision insurance market is dominated by two massive, vertically integrated plans that provide coverage to a large majority of Americans who have vision insurance. These insurance companies own labs, make lenses, and even own many of the most popular eyeglass frame brands. They also own many of the country’s largest vision care centers. Since the biggest insurance plans control so much of the market, they can dictate reimbursement rates to independent optometrists, force them to accept unfavorable contract terms which fix prices and force doctors and patients to use plan-owned labs, and back them into a corner that requires them to put their business at risk by transferring profits back to the insurer.
The entire system is designed to benefit the insurer, not the doctor – and certainly not the patient. Researchers have found that insurers design their plans in this manner to maximize their profits by forcing doctors to return profits and pass additional costs on to consumers. Avalon Health Research wrote in 2016 that the vertically integrated model places pressure on doctors to make up for lost revenue by charging higher prices, a system that “transfers operating margins from providers to plans without benefiting consumers.” The effects were most acutely felt by patients who do not have insurance, according to Avalon.
Policymakers in almost every state have recognized how severely vision insurers have tilted the scales in their own favor. The dental insurance market is structured in much the same way. All but six states now have some version of a law on the books that prevents insurers from forcing doctors into bad contracts and extracting more money from patients by abusing their often uncontested market power. However, about a third of insurance plans fall outside of state regulations and are instead regulated by the federal government. That means Congress needs to pick up the ball to protect millions of Americans who are subject to a rigged insurance market.
A federal law to stop price fixing and protect patients from insurance companies who set out to manipulate the market would close the gap in plans that aren’t subject to state laws. The Dental and Optometric Care (DOC) Access Act would do just that, giving doctors more freedom to work with patients to choose the labs and products that work best for them. It would also prevent insurance companies from forcing doctors to accept network agreements longer than two years, allowing doctors more freedom to negotiate fair terms. Patients would be the big winners, freed from an arbitrary system that forces them to pay more for fewer choices.
Competition is the key to the free market. Unfortunately, markets aren’t free when one party uses its power to close off competition, drive up prices, and tilt every part of the playing field for its own benefit. Congress should pick up where the states left off by standing up for patients and doctors and protecting the free market from manipulation by big insurers.
The author is president of Americans for Limited Government.