Vision Service Plan Inc.

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Vision Service Plan Inc.

3333 Quality Drive
Rancho Cordova, California 95670
U.S.A.
Telephone: (916) 851-5000
Toll Free: (800) 852-7600
Fax: (916) 851-4858
Web site: http://www.vsp.com

Private Company
Incorporated: 1955 as California Vision Services
Employees: 1,900
Sales: $2.06 billion (2004)
NAIC: 524114 Direct Health and Medical Insurance Carriers

Vision Service Plan Inc. (VSP) is the largest eye-care insurer in the United States, providing vision health coverage to one out of every eight people in the country. VSP boasts a network of more than 22,000 doctors that serves the company's 41 million members. VSP doctors provide both eye exams and eyewear, with some of the eyewear provided to VSP patients made at the company's optometry lab in Sacramento. VSP covers the gamut of eye-care services, ranging from eye exams to surgical procedures. Through the company's subsidiary Eyefinity, which, unlike VSP is a for-profit entity, the company provides independent doctors a full range of services via the Internet. The company also operates Sight for Students, a program that provides eye exams and eyeglasses to low-income, uninsured children. VSP has 21,000 corporate and business clients.

ORIGINS

What became the largest eye-care insurer in the country began with more modest intentions during the mid-1950s. In 1954, two organizations were formed, the Alameda Contra Costa Optometric Society and the Joint Council on Vision Care. One year later, in September, the two entities merged, creating California Vision Services (CVS), the nonprofit eye-care provider that 20 years later became VSP.

The impetus for the formation of CVS was drawn from a group of optometrists in the San Francisco Bay Area, who, with help from the California Optometric Association, decided to offer prepaid vision benefits, an undertaking they launched in a small shopping center in Oakland, California. The effort began as an employee benefits program that drew its first members primarily from labor and management trust funds and school districts, a business concept that was novel and limited in its reach. The novelty of the program offered by the founding group of optometrists held the development of CVS in check to some extent. Organizations and their employees needed to be educated about the concept of prepaid vision care and persuaded to become members. Perhaps more of hindrance to the program's acceptance was the general perception of vision care as a benefit. When discussions of benefit packages were discussed, the topic of eye-care services rarely came up, relegating coverage of eye exams to the backwater of insurance-related discussions. Employers, labor unions, and parties involved in collective bargaining arrangements generally focused first on medical coverage before moving down the line to employee benefits related to death, disability, dental, pharmaceutical, pensions, profit sharing, and vacations. Eye care, if the subject was broached at all, typically was at the end of the line. CVS, in this context, became a champion of vision care coverage, a company with a pioneering mission that was forced to wait for its innovative message to change conventional thought.

The vision plan that debuted under the CVS name and later flourished under the VSP name become a model emulated by other states, but the rise in acceptance of eye-care coverage took decades to take root. Group trusts that derived their power from the Taft-Hartley Labor Act and other union-sponsored, collective bargaining arrangements helped foster the inclusion of vision care coverage during CVS's first decades in business, making the coverage a more common facet of the benefit packages offered by Fortune 500 companies. CVS during this period celebrated its development with the achievements that represented the milestones charting its development from a Bay Area program, to a statewide program, and eventually into the national giant it later became.

Led by its founding president, Bernhardt N. Thal, a doctor of optometry, CVS initially focused on labor unions to promote its prepaid program for eye care. Within three years of its founding, the organization offered itself to the American Optometric Association, but the national body perceived no need for an entity of CVS's ilk and declined to purchase the company. Undeterred by the lack of interest, CVS pursued its own path, signing its first multistate contract in 1958. Under the terms of the agreement with the Masters, Mates, and Pilots Local 90 Union, CVS paid claims in the port cities of Boston, New York, Philadelphia, New Orleans, Galveston, Seattle, and Portland. The next important contract was signed seven years later after numerous smaller agreements added to the legitimacy of the company's concept. In 1965, CVS signed a contract with the Western Conference of Teamsters, who agreed to include the company's vision care program in its benefits package. With the acceptance of its program exceeding initial expectations, CVS was forced to move to larger headquarters by the end of the decade. In 1968, the company moved its central offices from Oakland to Sacramento, where its operations would be based into the 21st century.

By the time CVS moved to larger quarters in Sacramento, the company was beginning to see itself as more than just a northern California organization. By the late 1960s, efforts were underway to expand beyond California's borders. These efforts would pay off during the 1970s, a decade of significant maturation for CVS. In 1968, the company signed an agreement with Hawaii for future work in the state. In 1974, it assumed control over the administration of Nevada Vision Service, an arrangement that soon led to CVS signing its first client in the state. In 1976, the year CVS officially became VSP, the company widened its operating territory to a four-state area by assuming responsibility for Oregon Vision Service Plan. The decade also included two significant events that broadened its capabilities and its exposure to the vision care market. In 1972, the company opened its own optical laboratory in Sacramento, vertically integrating its operations in a bid to keep its costs down. In later years, the Sacramento lab would produce more than 2,000 pairs of eyeglasses a day. In 1979, under the VSP name, the company signed its first contract with a health maintenance organization (HMO), marking its entry into the managed care market, which represented a major market for VSP at the end of the century. By the end of the 1970s, VSP stood as a rising force in the vision care market, boasting 2.4 million members.

COMPANY PERSPECTIVES

At VSP, we're dedicated to offering affordable, high-quality eyecare plans that put people first, support visual wellness and improve one's quality of life. As the nation's largest provider of exceptional eyecare coverage, more than one in 10 Americans rely on VSP for eyecare wellness. For close to half a century, we have and will continue to be a trusted advisor in eyecare wellness benefits.

A NATIONAL FORCE TAKING SHAPE IN THE 1980S

VSP completed its first steps toward becoming a multistate insurer during the 1970s. During the 1980s, the company expressed its intention to become a national company, the first time a vision care specialist made a concerted bid to develop a 50-state membership base. VSP made its objective known in 1984, one year after it reached the $100 million mark in revenue. A major expansion and acquisition program was launched in 1984, the year the company created the State Professional Representative program, which consisted of a group of doctors selected from across the country who would advise VSP on issues pertinent to eye care. By this point, VSP's network of professionals included 5,000 doctors, a number that would increase as the company began its march across the country, establishing a presence in new regions by either opening its own offices or gaining entry into markets through acquisitions. The expansion program touched off in 1985, when a regional office was opened to serve New York, New Jersey, Connecticut, and Rhode Island. The following year, an office was opened in Atlanta, which served as the company's southeastern hub for a six-state region. In 1987, St. Louis became the center of the company's business in the Midwest, presiding over a six-state area. The following year, VSP merged with Mid-Atlantic Vision Service Plan, which spread the company's presence into Washington, D.C., and neighboring Virginia and Maryland. After adding an office in Wisconsin in 1989, VSP ended the decade with eight million members, more than three times its membership base at the start of the decade.

VSP's expansion during the 1980s represented the most prolific period of growth in the company's history, but the record was soon broken. During the 1990s, the company's expansion efforts, in terms of both geography and the breadth of its services, made it the clear leader in the country, fulfilling the mission articulated in 1984. The company had nearly 1,000 employees when it unleashed its most ambitious expansion program, but one employee, the 30th employee hired by the company, stood out from the rest, earning much of the credit for the formidable sway it held at the beginning of the 21st century. Roger Valine was hired as a management trainee in 1973, the year after he earned an undergraduate degree in sociology from California State University. Valine, who was raised on a 40-acre farm near Sacramento, was named president and chief executive officer in January 1993, taking the helm as major efforts to expand the company already were underway. In 1990, the company created a program named Managed Eyecare that encompassed the spectrum of vision care services, including complex eye treatment that required surgery. The year also marked the establishment of a regional office in Seattle that governed a four-state territory in the Pacific Northwest. In 1992, the company formed a subsidiary named Altair Eyewear, which was created to sell private-label frames to VSP's network of doctors.

VALINE GUIDING VSP TO ITS 50TH ANNIVERSARY

Valine used the momentum built up during the 1980s and the first years of the 1990s and guided VSP toward greater heights. One of the most important achievements of his tenure occurred at the beginning of his term, when VSP merged with Northeast Vision Service Plan and Midwest Vision Service Plan, the second and third largest eye-care insurers in the country. The merger grew out of joint venture agreements among the three companies that preceded Valine's appointment as president and chief executive officer. The three companies had joined forces to provide coverage to large national corporations that operated in numerous locations, leaving their employees scattered across the country. Midwest Vision Service Plan, which had one million members in a two-state territory, was acquired first, joining VSP's operation in 1993, the same year the company moved to the suburbs of Sacramento, settling into a $20 million headquarters facility in Rancho Cordova. The deal with Northeast Vision Service Plan was completed in early 1994, adding 1.4 million members in an eight-state region. Combined, the two transactions added $72 million in annual revenue.

KEY DATES

1955:: Vision Service Plan is incorporated as California Vision Services.
1968:: Company executives begin to explore expansion beyond California's borders.
1972:: A wholly owned optometry laboratory is established in Sacramento.
1976:: California Vision Services changes its name to Vision Service Plan.
1979:: Vision Service Plan signs its first contract with a health maintenance organization.
1984:: Vision Service Plan announces its intention to become a national company.
1990:: Managed Eyecare is formed to offer complex eye treatment services.
1993:: Roger Valine is appointed president and chief executive officer.
1997:: Sight for Students, a program aimed at providing vision care to low-income children, is launched.
2000:: A for-profit, Internet-based subsidiary, Eyefinity, is formed.
2004:: Revenues surpass $2 billion, a record high.

When Valine took control of VSP, the company was coming off a year in which it generated $443 million in revenue. The company provided insurance to ten million members in 38 states during the year and extended its coverage to all 50 states by early 1994, when revenues eclipsed $500 million. "Our goal," Valine said in a May 23, 1994 interview with Business Journal Serving Greater Sacramento, "is to become a national company." The company already operated in every state by the time Valine made his declaration, but the bulk of its business, even after years of geographic expansion, was derived from California. VSP relied on revenues from California for nearly 70 percent of its business volume, a percent-age that would decrease as Valine fleshed out the company's presence in other regions and made VSP more of a well-rounded, national company.

Considerable progress was made during Valine's first five years in charge. After the 1997 launch of Sight for Students, a charity that provided free eye-care services to underprivileged children, Valine's five-year anniversary as chief executive officer coincided with revenues surpassing the $1 billion mark for the first time, a total drawn from the company's 25 million members. By the end of the 1990s, membership stood at 27 million, with enrollment having more than tripled during the decade.

VSP entered the 21st century as the industry giant, providing coverage to 12 percent of Americans and 31 percent of Californians. The company formed a new e-commerce subsidiary named Eyefinity in 2000 to provide independent doctors services over the Internet. "We started to talk to doctors regarding utilization of the Internet three or four years ago," Valine explained in a September 22, 2000 interview with the Sacramento Business Journal. "We have worked very hard on incentives to come on the Internet because it saves us money. A customer-service call by phone costs a few dollars, while it costs a few cents to go on the Internet."

Aside from branching out into new areas to stimulate growth—Eyefinity was established as a for-profit entity—Valine continued to look to the company's primary business for growth opportunities. Despite VSP's ever expanding membership rolls, only 25 percent of U.S. businesses offered eye-care benefits to their employees. Such data fueled Valine's confidence that VSP would continue to grow well into the future. In 2004, when the company's revenues eclipsed $2 billion, Valine projected that the company would generate $3 billion in revenues by 2012. As VSP celebrated the end of its first half-century of business in 2005, Valine's forecast boded well for the company, but the goal, if reached, was to be met without Valine occupying his posts as president and chief executive officer. Valine, who had orchestrated a fourfold increase in revenues during his first dozen years, announced his intention to retire by the end of the decade. VSP, as it made its way through its second half-century of business, would have to navigate its course without the capable leadership of one of its most influential executives.