Pet Health Insurance

by Bruce W. Little, DVM

I recently returned from the annual American Veterinary Medical Association (AVMA) Convention that was held this year in Boston, Massachusetts where I visited and interacted for several days with veterinarians from across the country. The exchange of thoughts and ideas at a meeting such as this is common, usually with topics relating to current diseases, diagnostic innovations, treatment capabilities and business protocols being at the top of the lists for discussion. However, I was pleased to talk with several veterinarians at this meeting who asked my opinion on pet health insurance, and how they should respond to their veterinary hospital clients who ask the question, “should I take out health insurance for my pet?” My answer was a most resounding “YES”!

Full disclosure: I served on the AVMA Group Health and Life Insurance Trust for eleven years while employed at the AVMA. I also served on the Board of Directors of Pets Best Insurance Services, Boise, Idaho from January 2008 until retiring in December 2014. So, I have a good working knowledge of how health insurance works and the value it can bring to policyholders for both human and animal patients.

The beginning thoughts for pet health insurance occurred in 1979 when clinical veterinarian, Dr. Jack L. Stephens who is considered to be the “Father of Pet Health Insurance”, grew frustrated with euthanizing pets because the family wouldn’t or couldn’t afford the medical care their pets needed. He made a commitment to spend his career in ending what he termed “economic euthanasia.” For more on Dr. Jack Stephens you can read his book, “A Different Kind of Veterinarian”: CreateSpace Independent Publishing Platform.

Today there are twelve pet health insurance companies that sell policies for pets in North America. There are others in start-up mode; however, these 12 companies currently sell 99% of all pet policies. To find a complete list of these companies, go to the North American Pet Health Insurance Association (NAPHIA) at www.naphia.org. The combined total premium volume for all twelve companies in 2014 was $660.5 million, which represents an increase of 12.8% over the previous year according to the 2015 NAPHIA State of the Industry Report. Approximately $400 million of that premium amount goes to pet owners as reimbursement for meeting the costs of providing health care to their pets. Over 1.4 million pets, 87% of them dogs, were insured in North America at year-end 2014. These numbers from the NAPHIA Report are important for several reasons. While 1.4 million pets seems like a large number, this represents only 1.6% of all dogs that are members of American households. It has been determined that insured pets see their veterinarians twice as often as those families who do not have their pets insured. Pet owners have recognized that regular veterinary care is essential to their pet’s health and well-being, and that pet insurance coverage can help to cover those charges. In fact, most pet insurance policies provide five times the purchasing power that the uninsured pet owner has, as the most common policy today is an 80%-20% co-insurance policy meaning that the pet owner pays 20% of the medical bills and the insurance company pays the 80% balance. There are policies that pay all the way up to 100%; however, and the premiums are adjusted accordingly. Of course, this percentage is calculated after the policy holder pays a deductible that most frequently ranges from $50 to $500. This added purchasing power in addition to the ability for families to budget for pet insurance premiums on a monthly basis makes pet health insurance very attractive to many people. As animals have become a part of the family, their healthcare needs must be taken into consideration as well.

Pet health insurance, like human health insurance, is designed to spread the risk of having to pay sometimes unexpected large amounts of money for accidents and illness over a broad number of policy holders. A standard ratio is considered to be approximately 80% of the claims are initiated by 20% of the policyholders in any given period of time. That is the way insurance works, by sharing the risk over a large body of potential patients. As the cost of healthcare service increases, pet owners can budget a reasonable amount of premium cost into their monthly expenses and be prepared for events that can and do happen. These premium charges that can be charged monthly to a credit card costs about $35.00 to $45.00 per month for most pet policies. In an emergency situation, health care costs can become prohibitive for some pet owners, all too frequently ending in the pet owner’s decision to euthanize the pet rather than treat it. More expensive technological diagnostic equipment and sophisticated treatments, many times utilizing Board Certified Specialists may be necessary and are gaining acceptance including radiation therapy, CT scans, organ transplants, joint replacements and chemotherapy. Having a pet insurance policy helps pet owners make tough decisions during these stressful times.

There is a common misconception that pet health insurance is similar in most ways to human health insurance. Actually, pet health insurance is classified as property and casualty insurance and functions more like human dental insurance, in that, one can purchases a policy that can vary according to amount of deductible, policy limits per accident or life-time coverage, and percentage level of co-insurance with all these policy inclusions contributing to the calculation of the monthly premium. However, unlike human dental insurance, pet insurance companies usually do not incorporate fee schedules that dictates a specific amount of reimbursement for any specific medical procedure. Some policies will cover congenital conditions and/or pre-existing conditions and some do not. The services that are covered for your pet are spelled out clearly in your pet insurance policy; therefore, you should read your policy thoroughly and try to understand what is included and what is excluded. Pet insurance is licensed and regulated in each individual state, and companies must pass rigorous tests when filing to sell insurance in that specific state. Policy language is required to divulge any and all tenets of the policy in an understandable manner. These regulations also determines the premium cost in many geographic locations, as state regulations dictate policy inclusions from state to state. Premiums are usually higher in large metropolitan areas in any given state than they might be for the same age, and breed of dog or cat in a more rural area.

Go to the web sites of the listed companies on www.naphia.org and compare the policies against each another. Call the company and ask questions about anything you do not understand. Unlike human health insurance that typically pays the doctor or hospital directly, a pet health insurance policy requires that you pay the veterinarian at the time of service and then submit a claim to the insurance company for reimbursement. It is possible for some pet insurance companies to reimburse a policyholder for claims on the same day as the service was rendered by electronic deposits to your bank account if the claim is submitted to the claims administrator promptly and is not too complex. Regardless of the complexity of the claim, a great majority of claims are administered and reimbursed within a 3-5 day period from the time of the service. Talk to your veterinarian about making arrangements to expedite this claims process.

In searching for a pet insurance policy that fits your family needs compare the various policy language from policy to policy and select the plan that fits into your budget and has the coverages that are relevant to your lifestyle and living situation. The age, breed, whether it has congenital or pre-existing conditions, living conditions such as being constantly indoors or a dog that frequents dog parks or other events that can affect the risk for your pet and are important in selecting the proper policy and level of coverage. It is also important to find the type of policy that best fits your needs; such as, a complete accident and illness plan that covers most all accidents or injuries, illnesses, surgeries, specialty consultations, prescription medications, cancer treatments and including acupuncture, chiropractic and physical therapy modalities. You might choose a simple accident only plan for situations such as broken bones, poisoning, car accidents, lacerations, or foreign object ingestion, or a wellness plan for routine veterinary care such as annual examination, spay/neuter, microchip for identification, vaccinations and flea, tick and heartworm prevention. The policy you select should let you visit any licensed veterinarian you choose including specialists and alternative (acupuncture, chiropractic or physical therapy) medical practitioners as long as they are licensed veterinarians.

Pet health insurance prevents pet owners from being in the unfortunate position of having to choose to end a pet’s life over the amount of money one can afford to spend when a beloved pet becomes suddenly ill or gets injured. And no matter how financially or mentally prepared we think we might be, these situations are always unexpected, emotionally stressful and financially draining. Making the decision to end the life of your pet because you cannot afford needed veterinary care is a difficult decision to place on a family that includes a four-legged family member. And, as usually is the case, all policyholders hope they never need the coverage!

For more information go to: North American Pet Health Insurance Association at www.naphia.org Bruce W. Little, DVM