Mr. Hobbes, like many older Americans, has benefited from the ever-increasing amount of information available about healthy living practices, and the technology of modern medicine, to successfully reach his senior years. Now, he faces several health conditions common to the elderly and, like most aging Americans, may have to face treatment compromises based upon limited means and a lack of adequate medical expense insurance.
Mr. Hobbes isn’t a retired business professional or a former public employee with a pension. He’s the family dog.
American dogs and other pets now find themselves included in the complexities surrounding medical expense insurance coverage. Costs of veterinary care are rising, and increasingly sophisticated and expensive treatments, such as Magnetic Resonance Imaging (MRI) and chemotherapy, are more widely available. Many dogs are living longer and thus contracting the more serious diseases of old age. Also, more single people and families own dogs for companionship, and regard their dogs as members of their family, worthy of the same health protections that the rest of the family enjoys.
All this has prompted the rise of pet health insurance providers and insurance alternatives over the last decade – although with more than 68 million pet dogs in America, and less than one percent covered by any type of health insurance plan, the market is ripe for expansion.
Benefits of coverage
Growth of this particular market is a good thing for everyone concerned about companion animals. Veterinarians like the concept, since anything that enables people to more readily afford and authorize treatment adds to their business, and enables them to deliver medical treatment to the limits of their education and clinic resources, regardless of the economic status of the owner. Dr. Steve Stelma, a veterinarian in rural eastern North Carolina, hopes that veterinary health insurance will greatly reduce the number of times he must “negotiate from the optimum medical care required by a patient to the level of care the owner can afford.”
Companion animals and their guardians also benefit. Some breeders in the United States now enroll their puppies immediately in a health insurance plan and encourage their puppy buyers to continue the coverage. It’s helpful to many people to have their pets’ healthcare budgeted into their regular, monthly expenses. These plans can assist with the exponentially higher expenses of multiple-pet households, and greatly reduce the incidence of “economic euthanasia” – animals that are euthanized due to lack of funds for medical treatment.
Also, many businesses enjoy the opportunity for providing an innovative and affordable employee benefit. Several corporations, like the Los Angeles City Employees Association, now offer pet insurance as a payroll-deductible benefit for their current and retired employees.
There are still hurdles for the young industry to overcome, including a generally low level of awareness on the part of many pet owners in America; many don’t know that health insurance plans exist for their dogs. And until recently, advertising campaigns for the industry were minimal.
This is likely to change, however, as several insurance companies have developed strategic business relationships with large corporations that have the advertising dollars to promote their insurance products. Pethealth, Inc., Canada’s fastest-growing pet insurance carrier, sells its policies on the Petopia Web site and through The Reader’s Digest Association, Inc. A few years ago, Veterinary Pet Insurance announced the formation of a partnership with Ralston Purina to educate dog owners about good nutrition, preventative veterinary care, and the availability of pet health insurance.
Early and current plans
Pet insurance companies have been around for many years, but early iterations of the industry addressed only basic healthcare coverage, excluding far more conditions, procedures, and breeds than it covered.
Twenty years ago, one innovator, veterinarian Jack Stephens, launched an insurance company that covered a wider array of veterinary treatments. Frustrated by incidents in which he was asked to euthanize an animal because its family was unable to afford treatment, Dr. Stephens founded Veterinary Pet Insurance (VPI), now thought to be the largest pet health insurance company in the U.S., with the specific goal of putting an end to “economic euthanasia.” VPI now holds more than 220,000 active policies.
Following that lead, the field has widened to include several national pet health insurance companies, discount organizations, and even healthcare specialty packages offered by large animal hospitals and clinics. Like choosing a human health insurance plan, purchasers must deal with the idiosyncrasies of each provider’s coverage limitations, treatment and condition exclusions, deductibles, and paperwork.
Today, there are three different types of businesses that address the cost of pet healthcare: insurance companies, membership discount organizations, and practice-based discount plans.
Pet health insurance resembles what human healthcare used to be before managed care took over the industry. Unlike today’s human health insurance companies, pet insurance companies neither control the pricing at veterinary practices nor dictate what healthcare treatments are allowed. Instead, they offer a simple fee-based plan that essentially shares the risk associated with the medical care of pets among many pet owners. So, technically, they more closely approximate property or car insurance in that they reimburse policy holders, within the limits of the policy, for healthcare costs. The carriers are regulated by the state’s insurance commission where they are licensed to provide coverage.
Premiums for pet insurance are generally based on the animal’s species (some providers cover exotic pets in addition to dogs and cats), breed, age, and sometimes its weight or size.
Under this type of health insurance plan, a dog owner chooses her own veterinarian, selects treatments within certain guidelines, pays the veterinarian out of her own pocket, and submits a claim to the insurance company for reimbursement under the schedule established by its plan, less a deductible. Each of the companies we examined (see “A Quick Look at the Plans,” next page) offers broader levels of coverage for increasingly higher premiums.
For instance, most companies offer accident and serious illness coverage under their basic plans. Additional tiers of “wellness” coverage appear in more expensive plans. These levels add coverage for treatments such as spay/neuter, vaccines, annual checkups, preventative care (such as heartworm medication), and even, in some cases, holistic treatments including acupuncture and chiropractic. Some also cover the cost of prescription drugs.
Finding out what a particular company does not pay for is just as important as knowing what they do cover. Most pet insurance companies offer – at an additional cost, of course – “endorsements,” or policy riders for expensive, chronic conditions, such as cancer. Some plans limit coverage for certain conditions common to particular breeds. For example, one plan excludes coverage for skin allergies in Shar-Peis, a breed notoriously plagued by that condition.
Other common exclusions are elective procedures, grooming, foods, behavior-related treatments, congenital and hereditary defects, and pre-existing medical conditions. Most carriers have an age limit for new clients, although they will continue to carry enrollees – at an increasing cost – who mature while covered by the plan.
Reviewing the list of policy exclusions causes many owners to wonder if the whole idea of pet health insurance is right for them. The insurance providers suggest, however, that owners who maintain health insurance for their dogs don’t postpone needed treatments for sick and injured dogs and, when treatment choices are presented, opt for the immediate application of the most highly recommended care, regardless of cost. So, despite the exclusions, these carriers maintain that dogs receive greatly improved levels of care for accidents, serious and chronic illnesses, and surgical procedures.
This is the second major type of plan that aspires to make veterinary care more affordable. For a monthly “membership” fee, members receive a discount on covered products and services from participating veterinarians and animal hospitals. More a discount program than health insurance, these plans accept any kind of dog, of any age, in any health condition. There are no forms to fill out, no deductibles, no waiting periods for reimbursements, no health-related exclusions. These plans contain no benefit caps, no limits to the number of visits to in-network veterinarians, and no need to pre-authorize procedures. The dog owner simply pays the discounted fee to the participating veterinarian at the time service is rendered. However, this discount is available only from a participating, or in-plan veterinarian.
In return, veterinarians receive a portion of the monthly membership fees paid to the program provider and obtain access to a new, broader client base, referred to them from the program provider. These providers limit the number of veterinary practices enrolled in each zip code, thereby insuring increased traffic volume at participating veterinary offices.
These programs also extend discounts to members for pet supplies, boarding, grooming, training, day care, and even a pet ID and location service. If your veterinarian of choice participates in one of these plans, weigh the monthly membership fees against any proposed savings in health care costs.
If you patronize a large veterinary practice, it may offer its own discounted wellness packages with savings on routine healthcare, spay and neuter procedures, and geriatric checkups. It’s worth checking into any local preventative care packages provided by your own veterinarian of choice.
A dog owner who has decided to investigate and procure veterinary health care insurance or a membership discount plan should closely review the fee and coverage schedules from each provider and consider the carrier’s answers to the following questions:
What would happen if the company went out of business? Although it’s easy to find out how long the company has been in business, you can’t reasonably expect an honest answer if you ask whether the company is financially sound and likely to remain in business for the lifespan of your dog! Ask about the company’s underwriters and consumer protection policies.
How are the benefits paid? On a predetermined “reasonable fee” schedule, or does the company completely reimburse you for the entire invoice from your veterinarian?
What are the age limits of coverage for your dog? If your dog reaches that age limit while covered by a plan, will the coverage continue, and, if so, how much do the fees increase?
Are complementary or alternative health-care treatments covered by the plan?
Are prescription drugs covered? Is there an annual limit to this coverage in the case of dogs who take daily medication?
What added endorsements (policy supplements) are required for specific diseases such as cancer? What are the added costs?
Are deductibles applied for each incident or for each office visit? If the primary care veterinarian refers you to a specialist, “per-incident” coverage will not incur an additional deductible payment for the visit to the specialist, as long as the visit covers the same condition as covered in the original veterinary visit.
Does your veterinarian’s practice offer its own discounted wellness package?
Get it while you can
Today, veterinary medicine is one of the few healthcare professions whose economic structure is not based on its related health insurance industry. Dog owners, not insurance plan managers, decide which veterinarians to consult and which treatments to authorize, and current insurance policies support this structure by simply reimbursing or discounting these expenses.
However, the veterinary medicine industry may soon enter a critical period in its growth. With rising costs and increasingly sophisticated treatments, and the dog owner’s desire to manage their expenses by insuring their dogs, the shape of the industry may change to more closely resemble the human healthcare model.
In the meantime, veterinary medical insurance can represent one of the best insurance buys for consumers. In fact, the American Veterinary Medical Association, the American Animal Hospital Association, and the American Humane Association endorse the concept of pet health insurance.
The industry also offers a great financial growth tool for veterinarians, who will be able to perform more and better medicine for their clients. Under the current structure of the industry, veterinarians have little if any contact with the insurance provider, so insured clients do not present an administrative burden to the veterinarian’s office staff. And veterinarians face a difficult challenge in today’s economy. How can they open and operate a profitable practice while keeping their prices within reach of their clients? Veterinary health insurance may be the answer.
Despite the inevitable anecdotal reports of slow reimbursements and disagreements between consumers and companies about policy interpretations, the industry expects the popularity of these plans to grow significantly. This growth will encourage more competition, delivering lower prices and more comprehensive coverage packages to dog owners in the future.
The time may be right to find a health care plan for you and your dog.
-by Lorie Long
Lorie Long lives in North Carolina with two Border Terriers, Dash (a three-year-old female and agility queen) and Chase (a five-month-old male with an agility future).