California insurance exchange to add eye care for individuals; VSP satisfied

10/27/2012 12:00 AM

10/27/2012 9:31 AM

Moving to make peace with a furious and influential Rancho Cordova insurance company, state officials are planning to tweak the rules of California's fledgling online insurance market.

The company, Vision Service Plan, had threatened to leave California but said Friday it is "pleased" with the proposed new rules. The revisions are expected to be approved Tuesday.

The flap is over the California Health Benefit Exchange, which is building the state's new insurance market – a key element of the federal Affordable Care Act, President Barack Obama's overhaul of the health care system.

The online market opens in 2014 and is supposed to provide affordable coverage for an estimated 2 million uninsured Californians.

In August, the agency's board decided that stand-alone vision insurers, such as VSP, could sell coverage to small businesses but not individuals, which would keep them from competing for a significant slice of consumers.

VSP protested, noting that most Californians get eye-care insurance through stand-alone companies. The company, which employs 2,100 in the Sacramento area, threatened to leave the state, and postponed hiring 150 workers. The company got public support from Senate President Pro Tem Darrell Steinberg, D-Sacramento, Insurance Commissioner Dave Jones and the Sacramento Metropolitan Chamber of Commerce.

The board's reasoning had to do with federal tax subsidies being offered to individual purchasers.

Letting individuals buy eye-care insurance from one company and the rest of their coverage from someone else would require carving up the tax subsidies between companies. The board decided that was too complicated, at least in the first year of operation.

Critics, however, said stand-alone dental insurers were being allowed to sell to individuals in the market.

Facing the protests from VSP and a smaller Rancho Cordova eye-care insurer, Superior Vision Holdings, the agency promised last month to revisit the issue. On Friday it offered up its changes.

In a memo to the board, staffers proposed letting stand-alone companies sell eye-care coverage to adults. They also proposed letting those companies sell vision coverage to children as well, but the agency first needs clarification on a wrinkle in the new federal law.

"The dilemma for us is the lack of clarity in the federal law," said exchange spokesman Oscar Hidalgo.

The board is to vote on the proposed changes Tuesday.


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