VSP Global said it didn’t see this one coming.

It looked for awhile like California might be able to patch up its differences with the Sacramento-area-based company and include its Vision Service Plan (VSP) in the state’s federally-subsidized health care exchange.

But Governor Jerry Brown vetoed Assembly Bill 1877 last week, pissing off VSP President and Chief Executive Rob Lynch, who thought he had a deal after threatening to move a part of his operations elsewhere. “We are surprised and shocked,” Lynch said.

The dispute began in 2012 when the state told VSP it could sell its insurance to small-businesses in Covered California but not individual customers because of federal regulations that complicated the doling out of federal subsidies. Although the not-for-profit company made its mark servicing groups of consumers through their employers, the company ventured out into the individual-plan insurance market in 2007.

California’s decision could affect a chunk of that business in the state.

Lynch said VSP, which provides coverage for 14 million Californians and 58 million Americans, would delay a major expansion in Sacramento and consider leaving the state altogether.

That spooked lawmakers, who put together legislation that attempted to satisfy federal rules by creating a separate website for vision coverage. Lynch was satisfied and broke ground on the expansion this year, while the Assembly and Senate both unanimously approved the bill.

An analysis by Assembly staffer Ben Russell warned that the plan might still have trouble getting federal approval. “This bill is intended to use federal guidance to facilitate the purchase of affordable, quality vision care coverage, thereby increasing access to vision care through stand-alone vision plans,” he said.

Governor Brown did not sound confident in his veto message (pdf) that the lawmakers had threaded the needle. “Creating a new state bureaucracy to inform consumers about vision plans isn’t necessary, nor is it advisable to divert Covered California’s focus with a new scheme, the governance of which may be impermissible under federal rules.”

–Ken Broder

To Learn More:

Governor’s Veto Is Setback to VSP’s Hopes to Sell Through Covered California (by Dale Kasler, Sacramento Bee)

Governor Vetoes VSP-Backed Plan to Work with Covered California (by Kathy Robertson, Sacramento Business Journal)

Big Vision Insurance Company Threatens to Move HQ over Obama Health Care Plan (by Ken Broder, AllGov California)