"We realized it was important for the profession to be involved in pet insurance as it evolved. We want the relationship to be a financial agreement between the pet owner and the insurance company."
—DR. GARY R. HOLFINGER, GHLIT CHAIR
The AVMA Group Health and Life Insurance Trust, as part of a strategic alliance with Aetna, will help equip veterinarians with a comprehensive understanding of pet health insurance.
Aetna, provider of the human health network for GHLIT, has partnered with Pets Best Insurance to offer health insurance policies for cats and dogs. Aetna will underwrite the policies, Pets Best will administer the policies, and the Trust will promote the benefits of pet health insurance.
Aetna and Pets Best have received an exclusive GHLIT endorsement, and a Trust advisory council will provide input to the companies about the direction that veterinarians want pet health insurance to take.
"Consumers need reliable methods, other than credit or savings, to pay for costly veterinary care," according to the GHLIT white paper "Pet Insurance: Managing the Process to Promote Quality Medicine."
"Veterinarians have witnessed the tremendous advantages that health insurance brought to human health care," the white paper stated. "However, they have also witnessed the negative changes from 'managed care' in restricting fees, dictating levels of care, networks, and the overall lack of management control by the medical community for their own profession."
The Trust hopes to help shape pet health insurance via the alliance with Aetna, which the participants announced in July at the AVMA Annual Convention. But some organizations and individuals have reacted with concern about the exclusivity of the GHLIT endorsement and the genesis of the arrangement.
Alliance with Aetna
Dan Fishbein, MD, Aetna's head of new product businesses, said Aetna and GHLIT discovered a mutual interest in pet health insurance during negotiations in 2007 for Aetna to provide the Trust's human health network. He said Aetna previously had conducted research on the market for pet health insurance.
"We think American pets are currently underinsured," he said. "Owners will increasingly be buying the coverage for their animals, particularly as the types of care available and, therefore, the associated costs continue to rise.
"We think it's going to be a great opportunity to provide financing to pet owners so that if they do have an unexpected medical event, they'll be able to take care of it without having to think necessarily about the cost out of pocket as the driving issue in their decision."
Dr. Fishbein said Aetna researched companies offering pet health insurance and had confidential conversations with two of them. Aetna started talking with Pets Best in late summer 2007 and has since done substantial due diligence—the evaluation of a company before a business transaction—according to Aetna and Pets Best.
Aetna also conducted market surveys this year, Dr. Fishbein said. One survey found that half of a sample of Aetna participants expressed interest in a human health insurer offering pet health insurance. A survey of physicians found that a larger percentage would view Aetna more positively for offering pet health insurance than would view the company more negatively. A survey of employers that offer human health plans found that 13 percent were very or extremely interested in pet health insurance and another 28 percent were somewhat interested.
Guidelines on Companion Animal Health Insurance and Other Third Party Animal Health Plans
(Approved by the Executive Board November 1994, May 2003)
The AVMA endorses the concept of companion animal health insurance that provides coverage to help defray the cost of veterinary medical care. (See item 3., below)
The Association recognizes that a viable companion animal health insurance program* will be important to the future of the veterinary profession's ability to continue to provide high quality and up-to-date veterinary service.
A companion animal health insurance program should:
- Be supported by organized veterinary associations, individual veterinarians, insurance providers, the companion animal owning public, and others interested and involved in promoting the welfare and well being of animals.
- Require a veterinarian/client/patient relationship in which the veterinarian monitors health maintenance of the companion animal.
- Be in the public interest, with clearly specified protection for the companion animal owner. The animal insurance provider should disclose to the consumer that the purchase of this insurance will be of most benefit in reducing the financial burdens resulting from medical problems requiring extensive veterinary medical care. Some insurance providers may also provide coverage for routine or wellness health care.
- Allow companion animal owners the freedom to select a veterinarian of their choice, and to allow for referrals.
- Allow each veterinary facility to establish its own fee structure.
- Meet the rules and regulations of the insurance commission of the state in which the insurance is sold. The insurance provider has a legal obligation to provide coverage using ethical standards that are endorsed by the insurance industry.
- Be readily available to the public in the state where the policy is sold.
- Be consistent with the Principles of Veterinary Medical Ethics.
- Reimburse the animal owner for fees previously paid to the veterinarian. Companion animal insurers should commit to assuring that animal owners are aware of how the terms and conditions of their policy will impact their coverage and reimbursement. Not only should the type and amount of monetary coverage be clearly explained to the policy holder, so should concurrent financial obligations such as co-pay, deductible, and other risk-management charges (e.g. surcharges, exclusions) that are integral components of the insurance contract.
* The AVMA recognizes that many third party and prepaid insurance programs may develop in the future. Those programs should comply with these guidelines.
The GHLIT developed its white paper on pet health insurance independently, according to GHLIT and Aetna, and Aetna agreed to operate under the Trust's standards.
In the GHLIT white paper, the authors discourage managed care in favor of pet health insurance that is more like property insurance than human health plans. With property insurance, the policyholder makes a claim only if the property suffers damage. Most pet health insurance plans likewise cover injuries and illness unless the policyholder pays for a rider to cover routine care.
In November 2007, GHLIT asked the AVMA Executive Board to amend the Trust's charter to include pet health insurance. The board has no role in day-to-day operations of the Trust but oversees the GHLIT charter and appoints the trustees.
Dr. Larry R. Corry, then board chair, said the trustees presented arguments for and against changing the GHLIT charter to encompass pet health insurance.
"One of the main points that they wanted to get across is that it would not be managed pet health care, by an insurance company that was going to be dictating how much veterinarians would be charging for various services," Dr. Corry said.
The Association does have a policy supporting the concept of health insurance for companion animals and offering general guidelines for insurance programs (see sidebar). The policy is up for review this month by the AVMA Council on Veterinary Service.
"I think pet health insurance is a good thing, but a very small percentage of our clientele actually has pet health insurance," Dr. Corry said. "I think the best thing it can be used for is a bad injury or illness that is going to cost several hundreds or maybe into thousands of dollars."
Dr. Corry believes more clients will purchase pet health insurance in the future, though the AVMA will not endorse any particular product.
The Executive Board approved adding pet health insurance to the Trust's charter in November 2007 and reaffirmed the decision in April 2008.
In April, the board also endorsed the GHLIT white paper on pet health insurance. In light of concerns that the AVMA appears to be endorsing certain insurance plans, however, the board asked the Council on Veterinary Service to review the white paper closely this month.
The white paper presents the GHLIT standards for pet health insurance, so why doesn't the Trust endorse each company that meets the standards?
Dr. Gary R. Holfinger, GHLIT chair, answered: "There are other companies that may well follow the white paper, and we're really glad that they do, but it's important to have a role model."
The Trust chose to work exclusively with Aetna, Dr. Holfinger said. Trustees also spoke with Aetna's consulting actuary for the Pets Best partnership. The GHLIT can remove the endorsement if the product ever deviates from the white paper.
Under the recent arrangements, GHLIT will receive 3 percent of the proceeds from Aetna-Pets Best sales of pet health insurance. The Trust will use most of the money for educational outreach to veterinarians, largely by distributing funds to state VMAs.
Aetna and Pets Best received permission to use the GHLIT logo in promotional materials as well as the phrase "in Partnership with the Health Insurance Trust of the American Veterinary Medical Association."
The Trust is forming an advisory council to handle the educational outreach and provide input to Aetna and Pets Best. Members of the advisory council likely will include representatives of small animal practice, specialty practice, critical care, and state VMAs.
"We realized it was important for the profession to be involved in pet insurance as it evolved," Dr. Holfinger said. "We want the relationship to be a financial agreement between the pet owner and the insurance company.
"We don't want the veterinarian to get into the job of having to justify fees or lower fees or having to do an enormous amount of paperwork."
At the same time, Dr. Holfinger said, the trustees believe pet health insurance is growing more imperative with the rising cost of veterinary care.
As an aside, Dr. Holfinger acknowledged the perception of a conflict of interest in the GHLIT-Aetna-Pets Best alliance, but he expressed confidence that no conflict exists.
Elizabeth L. Wallace, the Trust's chief executive officer, is the daughter of Dr. Bruce W. Little, who became a member of the Pets Best board about half a year after stepping down as AVMA executive vice president in August 2007.
Yet, Wallace joined GHLIT and Dr. Little joined Pets Best after discussions began with Aetna regarding pet health insurance. Wallace became CEO of the Trust in December 2007, coming from a position as vice president of national accounts at Coventry Health Care. Dr. Little officially retired from the AVMA at the end of 2007 and became a Pets Best member in late February 2008.
Pets Best perspective
Dr. Little said he plans to continue serving on the Pets Best board "as long as I can be of assistance in helping to develop a pet health insurance product that operates on a fee-for-service basis that does not include any managed care principles, fee schedules, or animal hospital networks."
Dr. Little does not want a system to develop "whereby the insurance industry dictates the parameters by which pet health insurance functions or veterinarians conduct their practices."
Dr. Jack Stephens, Pets Best president and founder, believes the GHLIT alliance with Aetna is a bold step to protect the veterinary profession and to inform veterinarians about pet health insurance. He thinks Aetna's entry into pet health insurance will transform the marketplace, expanding availability while maintaining pet owners' freedom to choose their veterinarian.
"Too many pet owners today are faced with hard economic decisions, where they simply don't have the money when their pet becomes ill or injured," Dr. Stephens said. "All this is, is another method to help them to budget for their pets' care. It's really about the affordability of veterinary care."
Dr. Stephens founded Veterinary Pet Insurance in 1982 for those reasons, and VPI is now the largest U.S. pet health insurer. After leaving VPI, he went on to found Pets Best in 2005. Pets Best has offered health insurance policies for cats and dogs that pay about 80 percent of veterinary costs.
The big picture
Back at the AVMA, the thinking is that the Association also needs to take a proactive approach to determining the direction of pet health insurance so veterinarians don't find themselves in the same situation as physicians have—with managed care influencing medical decisions.
But pet health insurance is here to stay, and the AVMA supports it.
According to the AVMA policy on pet health insurance: "The Association recognizes that a viable companion animal health insurance program will be important to the future of the veterinary profession's ability to continue to provide high quality and up-to-date veterinary service."