In the blink of an eye: employee demand for vision insurance keeps rising as many companies switch to voluntary coverage.

Seventy-four percent of U.S. adults wear prescription eyewear, and employee demand for vision insurance continues to grow, according to eyecare plan provider VSP Vision Care.

But four in 10 U.S. adults and children nationwide have no eyecare/ vision coverage, according to VSE And while six in 10 have some level of exam coverage, only about 40% have coverage for prescription eyewear.

In almost a blink of an eye, vision coverage has shifted away from an employer-sponsored benefit and into the voluntary arena. Now, many experts are looking at the future of this popular ancillary benefit through rose-colored glasses.

Only 18% of employers said they cover the full cost of vision insurance. according to the 2007 MetLife's Fifth Annual Study of Employee Benefit Trends. However, it remains a standard benefit particularly among "employer of choice" firms, said Jennifer Chien. vice president of Willis Insurance Services of California Inc. "Also. certain industries are more likely to offer vision coverage, such as municipality, public entity and government sectors."

For larger employers, vision plans with limitations cost about $5 to $10 per person per month, with annual cost increases of typically just 1% to 3%, said Caty Furco, office practice leader for group and health-care benefits at Watson Wyatt Worldwide. "For larger organizations, that's worth having because it's a highly valued benefit that's well worth the minimal monthly cost."

But Tom Mangan, president of Hub International Northeast's Benefits Division, said many employers no longer see the value of a vision plan. "Only about 50% or more people actually need the coverage and, while it's an inexpensive benefit, it has limited outcomes and employers are looking at that," he said.

As many employers reduce their medical benefits, they want to offer something in exchange that helps employees with out-of-pocket costs, said Denise Angleman, senior vice president of The NIA Group LLC. As a result, vision is increasingly transitioning into a voluntary offering, she said.

She sees opportunities for benefits brokers. Vision insurance offers brokers the opportunity to bring more value to clients and helps employers attract and retain key employees, she said, but brokers need to understand what they're offering and the differences between various vision vendors.

"If set up, communicated and enrolled properly, vision insurance provides employers with a great opportunity to save their employees and their families immediate dollars off their vision care expenses," said Angleman. "Vision is now among the top three most popular voluntary benefits because people are paying a lot for retail eyewear."

In 2006, the average retail price for corrective lenses in the United States was $101 and the average price for frames was $117, according to the Vision Council of America. (In 2001, the average cost of eyeglasses was about $175, according to Jobson Publishing LLC.)

Vision Correction

A recent survey of voluntary benefits by human resource consultant Cammack LaRhette found that, of 138 companies studied, nearly 35% offered employees vision insurance. Moreover, when voluntary vision was offered, nearly 60% of workers signed up for it, compared to 38% for disability insurance and 36% for supplemental life insurance.

But growing demand has some experts fearing that other ancillary coverages will take a backseat to vision coverage.

"People love vision and dental, but we're talking about very low-dollar things that shouldn't be insured in the first place," said Mangan. "People need other benefits, such as disability and life insurance, because they aren't buying it elsewhere. For the price of a vision plan, a person could purchase between $100,000 to $500,000 in group life insurance, and for 90% of employees that's the only source of life insurance they have."

Seeing Is Believing 

Vision benefits vary widely. Some plans reimburse everything from frames to lenses and contacts, while others are essentially discount programs. Coverages also differ, but a typical policy generally includes one annual eye exam, and frame and lens allowances every 12 or 24 months. Discounts on services, such as Lasik refractive correction surgery, are common.

The Principal Financial Group's standard plan includes a $50 annual exam allowance, a $100 allowance on frames with a frequency limit every 24 months and a $100 allowance on lenses every 12 months. The plan also includes a 20% discount for exams and hardware, and a 15% discount on Lasik surgery through its arrangement with VSP and LCA-Vision Inc. The majority of The Principal's sales remain employer-paid. However, in 2006, it rolled out a voluntary offering.

"Vision insurance is a simple, affordable, attractive, flexible product," said Theresa McConeghey, product director for group life, dental and vision product lines for Principal Financial Group. Its vision program promotes open access to vision providers, she said.

A number of health carriers now cover an annual vision exam via a medical benefits copay, and offer discounts on frames and lenses. "That's causing many companies to either drop their traditional vision plans or offer some new start-ups like Spectera or EyeMed," said Mangan.

"Today's market is much different than 15 years ago," said NIA Group's Angleman. "Now you can pick a nice pair of frames, basically covered with a small copay, if the plan that includes all of the bells and whistles is designed anal communicated properly."

"The differences in what's offered by employers are driven by benefits and costs," said Chris Reiter, vice president of employee benefits for ABD Insurance and Financial Services. "Most plan designs are similar in nature. Employees receive an exam, lenses and an allowable amount toward the purchase of frames when using network providers. If someone goes out of network, typically there's a set reimbursement for each type of service. Generally, an employer can't buy up or buy down coverage levels. The only leverage is the frequency of exams, lenses and frames."

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Watching Closely

Vertical integration among some carriers is a growing trend, said John Storto, vice president of Assurance Agency Inc. "The parent companies of some vision providers own the frame manufacturer, the lens manufacturer, retail outlets, claims payers and provide insurance. Hopefully that'll result in lower overall costs because if companies are making lenses and frames, they can sell them cheaper."

Storto said that, for brokers, vision benefits make "a good mix when packaged with the whole voluntary benefit package. Employers often focus on providing medical, disability and life. Brokers adept at providing a suite of voluntary coverages and platforms to deliver them will succeed."

He foresees a continuation of vertical integration in the marketplace. "It's a way for carriers to generate more profit on the same dollar. Also, plans' bells and whistles, such as covering tinting and antiglare on lenses, will become a way of differentiating contracts from carrier to carrier."

Storto has noticed a movement away from independent optometrists to large retail chains, such as Wal-Mart, Pearle Vision, and Costco. "Those chains make up nearly 75% of all glasses now purchased," he said.

But not all providers have moved in that direction. VSP has a "strong philosophy around continuous care provided by private-practice eye doctors," said Melody Healy, director of commercial marketing for VSP. "That's why VSP works directly with optometrists and ophthalmologists in our network. This increases the access points to health-care services."

Brokers said providers such as Spectera, a division of Specialized Care Services, a wholly-owned subsidiary of UnitedHealth Group, offer in-network coverage for both retail chains and independent optometrists.

"Individuals in rural settings generally prefer retail establishments in their networks," said Mike Colhoun, vice president with Aon Consulting's Health and Benefits practice, "while those in urban areas prefer practitioner-based models."

Whatever their preferences, "We're finding extremely high enrollment compared to other ancillary benefits because (vision insurance) is low cost and employers are encouraging people to enroll because of the preventive health aspect tied to it," said Healy.

The rise in computer vision syndrome--defined by the American Optometric Association as "eye and vision problems related to near work which are experienced during or related to computer use"--may increase employers' health-care costs unless managed appropriately, said Healy. Computer vision syndrome can cause a range of symptoms including dry, irritated or fatigued eyes; blurred vision; and loss of focus. "With more people using computers over four hours daily, there's increased vision issues. Having the right glasses can alleviate some eye strain while also increasing productivity," she said.

Renee Hackett, a consultant for Mercer Health and Benefits, said vision insurance can have a dramatic impact on an employer's bottom line. "Prescription eyewear for computer vision syndrome can gain an employer about $5,400 worth in productivity for someone who earns about $60,000 a year," she said. "That's a huge incentive for employers to look at vision coverage."

Windows to Health

Adequate vision protection is more than just coverage and discounts on hardware and exams. "Many medical ailments manifest initially as eye issues," said Willis' Chien. "Therefore, vision care has an indirect impact on medical claim costs."

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Scientific evidence suggests routine eye exams are early indicators of serious medical conditions such as diabetes, cataracts, hypertension, high cholesterol, vascular problems and cancer.

Exams also offer early warning signs for glaucoma in people with diabetes, said Mangan. "Link that back in and the ROI is in the hundreds or thousands for every dollar invested," he said.

Vision carriers now are doing more outreach to subscribers about the importance of annual eye exams, said The NIA Group's Angleman. "With the consumer-directed model on the medical side, there's another means to get preventive-type checkups that can save lives or claim dollars."

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Employers and employees must understand the value of vision coverage, said Angleman, "particularly from the wellness standpoint. Many employers are starting to put programs in place and tapping into vision experts' tools to help educate employees and prevent disease."

In fact, vision care is slowly becoming a part of some providers' disease management programs. "Employers are looking at their benefit programs more holistically, which includes vision insurance and other benefits such as employee assistance programs," said Hackett.

Angleman said, however, that there are still some misconceptions about the coverage.

"Carriers are trying to enhance their product portfolios anal adding discounted vision programs, but there's confusion between discounted vision programs versus truly insured vision programs," she said.

"For instance, many plans offer a discounted program where someone shows their medical and dental identification card and gets a discounted rate on frames and lenses," she said. "Frames have an approximate markup of 200% to 400%, so at least the member is getting a discount, but they don't have insurance coverage. With vision programs, you're getting coverage and payment for services incurred."

The outlook for vision coverage calls for continued change. Colhoun, for instance, says vision benefits will be tied more closely to other coverages.

"As employers communicate consumerism and total health management, they're looking at the full spectrum of health benefits," he said. "We will find that over time, medical, dental and vision benefits will become more of a commingled contribution. If someone is enrolled in one, then they're enrolled in all three."

Watson Wyatt's Furto believes organizations will re-evaluate frame and lens allowances, and potentially include other allowances for services such as Lasik surgery.

And Healy believes policies may eventually include discounts or coverage of higher-end materials such as no-line bifocals and lenses with antireflective, antiglare and scratch-resistant coatings.

However, she foresees little growth in frame sales.

"People only have so much discretionary income to spend," she said. "They're buying better glasses to meet their eyecare and fashion needs but not as frequently, especially among seniors with more complex and expensive prescription needs."

* The trend: Vision insurance is increasingly an "an-demand" voluntary employee benefit.

* The Significance: There's a link between vision and overall health.

* What Needs to Happen: Benefits brokers need to educate employers about the importance of vision coverage

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By the Numbers: Vision Facts

90% Percentage of adults who rate eyesight as their most important sense, yet more than half haven't had an eye exam in the past 12 months.

74% U.S. citizens between the ages of 25 and 64 who require some sort of vision correction.

200 million Individuals over age 18 who wear some form of vision correction.

1 in 5 Children under age six who need prescription eyewear on their first visit to an eye doctor.

12,000 to 24,000 Number of new cases of blindness each year in adults age 20 to 74 caused by diabetic retinopathy.

$3.4 billion The estimated cost the federal government spends each year treating cataracts through the Medicare program.

2.2 million Number of Americans age 40 or older affected by glaucoma.

70 million Number of Americans with myopia (nearsightedness).

60.9 million Number of people in the United States afflicted with hyperopia (far-sightedness).

Sources: VSP Vision Care, EyeMed, National Diabetes Information Clearinghouse, Prevent Blindness America, National Eye Institute, WrongDiagnosis.com.

A Bird's-eye view of Lasik

A more people eye the possibility of forgoing their glasses in favor of Lasik surgery, it's got them looking for coverage. But most vision insurance policies don't reimburse policyholders for the popular elective procedure.

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Why? Vision providers often consider Lasik to be cosmetic.

In 2006, 24.6 million Lasik vision correction procedures were performed globally, according to Lasik Benefits USA. Industry sources report that Lasik and laser-based procedures cost, on average, about $2,100 in 2007. Costs have slowly declined in recent years.

Some larger employers do provide some type of reimbursement for the procedure, said Chris Reiter, vice president of employee benefits for ABD Insurance and Financial Services. But the majority of national vision providers, such as VSP, offer a discount typically between 15% to 20% off the retail cost of the surgery, he said.

"It's a highly-valued benefit that's now being used more, especially since much stigma around risks has gone away, the success rate is good and publicity has become more favorable," Reiter said.

For many employees, flexible spending accounts have become popular vehicles to fund Lasik surgery.

Jennifer Chien, vice president of Willis Insurance Services of California Inc., foresees a trend, now occurring in dental coverage, that may take root in vision coverage.

"There are cosmetic riders for services such as teeth whitening," Chien said. "Given consumer demand for Lasik and new Wave (wavefront custom-guided corneal ablation) procedures, we may eventually see such riders making their way into vision insurance."

Eyes Wide Open

According to a recent survey,
individuals shop for a vision policy
based on:

                        Females    Males

Coverage                  54%       48%
Health-care provider
  flexibility             18%       20%
Premium                   14%       15%

Source: marketsurveys.com

Note: Table made from bar graph.