U.S. Settles Pricing Lawsuit Against Vision Care Insurer

The Justice Department on Thursday sued and settled with the nation’s largest vision care insurer over allegedly illegal agreements that the government said discourage optometrists from cutting prices or offering discounts on vision care services.

Under the settlement, Vision Service Plan, headquartered in Rancho Cordova, Calif., will no longer require optometrists and ophthalmologists to give Vision Service the lowest price they charge individuals or other insurance plans.

The agreements inhibited vision care providers who did a large amount of their business with the plan from discounting their charges to others, Justice Department officials said, and they restricted competing plans from attracting and retaining enough doctors to serve their members.

Anne K. Bingaman, assistant attorney general for antitrust, said the suit and settlement marked the first national attack on a pricing practice reported to be widespread in the health care industry and noted that cases are under investigation in other segments of the industry.

More than 90% of California’s optometrists have signed up with the plan, which does business with about 7.5 million consumers in the state, Bingaman said. One measure of the provision’s impact is that the average price for an eye examination and glasses in California is $100 to $110, compared to $70 to $80 in states where the plan is not in effect, she said.

“We believe the effect per plan member could be $20 to $30,” Bingaman said.

In August, the federal antitrust enforcers settled a case against an Arizona dental plan that eliminated a similar pricing provision, known in the industry as a “most favored nation” clause.

VSP admitted no wrongdoing in settling the civil suit, and Roger Valine, the plan’s president and chief executive officer, said the plan will adopt a new fee-setting system. Valine said VSP settled the case “to avoid long and expensive litigation with the Justice Department that could easily have cost thousands and maybe millions in legal fees.”

In markets where a health care plan has only a small share, the pricing provision can encourage discounts, Bingaman said. But where the plan dominates the market, the provision discourages doctors from discounting to anyone because they would have to extend the lower prices to the bulk of their business in the dominant plan.

Bingaman said Vision Service applied the clause in about 42 states and the District of Columbia, probably harming vision care service consumers in all or parts of many of those states.

As a result of the clause, other vision care insurance plans have been unable to obtain discounts of 20% to 40% for which they had contracted with doctors, Justice Department officials said.

Although Bingaman said she could not quantify the overall dollar impact of the clause, she noted that the vision care services market in California is well over $500 million a year, and that it is in the billions of dollars nationwide.

Elimination of the “most favored nation” clause in the VSP case “will promote operation of the free market,” Bingaman said. “It will allow optometrists throughout the country who are members of Vision Services to discount as they see fit, case by case, plan by plan, consumer by consumer without fear that it will impact their revenue across their entire practices.”