Healthcare.gov will reopen for business on Nov. 15, welcoming millions of Americans to an insurance marketplace that offers medical plans and dental coverage. No one will be shopping for separate eye-care plans, an exclusion that roils companies that sell vision insurance. Even though they aren’t getting new customers, vision insurers still have to pay the Affordable Care Act’s tax on health insurance providers. Why did vision get left out of Obamacare?
The answer reveals a lot about the rabbit hole of bureaucracy and political gridlock that’s responsible for so much of American public policy in 2014. Vision plans were originally intended to be part of the exchanges when the ACA was being drafted, says Rob Lynch, chief executive of VSP Global, a vision plan that covers eye care for 67 million Americans. Lawmakers became concerned about how subsidies to help people afford coverage would be split among medical, dental, and visual providers, so glasses got left out.
But eye-care plans remained subject to the tax on health insurers. When VSP paid the fee last week, the levy amounted to $25 million. In a letter to the Internal Revenue Service along with the payment, VSP’s general counsel said the company intends to seek a refund.
A spokeswoman for the Centers for Medicare and Medicaid Services, which oversees the Obamacare exchanges, declined to comment. She referred to an agency document (PDF) confirming that stand-alone vision plans can’t be offered on the health exchanges. Why, then, are companies that sell them subject to the ACA’s tax? The spokeswoman suggested posing the question to the IRS.
The IRS, in turn, referred questions to its parent bureaucracy, the Treasury Department, which furnished a prepared response: “Consistent with the statute, stand-alone vision care plans are considered health insurance and therefore subject to the fee.” A Treasury regulation published in December notes that “dental and vision benefits are intended to be included as health insurance” subject to the tax, even if they’re not considered health insurance that can be sold on the exchanges.
The Affordable Care Act levies fees on a lot of stakeholders who aren’t thrilled about it: insurance companies, medical device makers, tanning salons, large employers that don’t provide coverage, and individuals who don’t want to buy it. The tax on insurers, which is apportioned according to market share, will raise $8 billion this year, and the take will only increase in the years ahead.
VSP’s Lynch isn’t grousing about paying the tax, and his company isn’t asking for a piece of the Obamacare subsidies that help people pay for medical insurance. He just wants vision plans listed on the marketplaces. “We don’t have an issue with the legislation,” he says. “As a matter of fact, we supported the legislation. We don’t even have a problem paying the tax. We just want to participate.”
A handful of states running their own exchanges, including Colorado, Nevada, and Hawaii, offer ways for shoppers to buy vision coverage. Lynch has been lobbying California, where VSP is based, to add vision plans to Covered California, the state-run Obamacare marketplace. Lawmakers in Sacramento passed a bill to do so unanimously in August, through a program that would be funded by the vision insurance companies. But Governor Jerry Brown vetoed the bill last week, the Sacramento Business Journal reported.
In a functioning government, policymakers could fix the law either to allow VSP and other vision plans onto the exchanges or exempt them from the tax intended for exchange-eligible plans. Lynch says years of meetings—with leaders in the House and Senate, officials in the White House, and the Centers for Medicare and Medicaid Services—haven’t led to any solutions.
Lawmakers say regulators can fix it; regulators say the statute needs to be changed. No one is opening up the ACA for minor legislative fixes that once would have been the routine business of Congress. “We’re caught in a loop here,” Lynch says. “Everybody points the finger at somebody else. … We’re absolutely in The Twilight Zone.”
