Staying Afloat

Pet health insurance helping more pet owners afford optimal care
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Pierre the French Bulldog had an adventure last Fourth of July that ended with owners Nikki and Justin Kanter of Chicago being glad they had purchased pet health insurance.

At a get-together, Pierre fell into their hosts’ pool and sank like a stone. A friend rescued the dog, and the Kanters put Pierre inside the house. There, the dog found and ate some dough for chocolate chip cookies. He just seemed drowsy, so the Kanters headed home. But after Pierre collapsed twice, the Kanters took him to an emergency clinic.

Owner retrieving a dog from a pool
Courtesy of Veterinary Pet Insurance

Pierre received treatment for shock and excessive gas from the cookie dough, and he made a full recovery. The Kanters keep a closer eye on the dog now, have bought him a life vest, and continue to maintain his policy with Veterinary Pet Insurance.

Pet health insurance has grown more popular since VPI introduced the product in the United States three decades ago, although its use is still not widespread. About 2 percent of U.S. dog and cat owners hold policies, according to a Packaged Facts consumer market research report from October 2013.

The policies remain more similar to automobile or homeowners insurance than to human health insurance, with most companies in the industry reimbursing pet owners for veterinary care following treatment of a pet for an accident or illness. Many veterinarians are hopeful that pet health insurance won’t become more similar to human health insurance, with the accompanying drawbacks for the practice of medicine.

The AVMA policy “Pet Health Insurance” starts by stating: “The AVMA endorses the concept of pet health insurance that provides coverage to help defray the cost of veterinary medical care. The AVMA recognizes that viable pet health insurance programs will be important to the future of the veterinary profession’s ability to continue to provide high quality and up-to-date veterinary service.”

Guidelines for insurance

The AVMA Council on Veterinary Service last reviewed the AVMA policy “Pet Health Insurance” in September 2013, with the Executive Board approving updates in November 2013. The council consulted with industry representatives during its policy review.

The AVMA policy states that a pet health insurance program should comply with the following guidelines:

  1. Requires a veterinarian-client-patient relationship.
  2. Allows pet owners to choose their own veterinarian, including specialists and emergency and critical care facilities the pet may need.
  3. Never interferes with the veterinarian’s fee structures.
  4. Is offered only where the policies are approved by the state insurance regulatory agency.
  5. Is consistent with the Principles of Veterinary Medical Ethics and the pet health insurance industry ethical standards.
  6. Uses a licensed veterinarian to assist in claims adjudication.
  7. Is clear about policy limits, pricing structure, and optional coverages (for example, wellness coverage for annual visits) that might be available to the policy holder.
  8. Is transparent about how the terms and conditions of the plan will impact coverage and costs, including the financial obligations of the policy holder such as co-pays, deductibles, and exclusions.
  9. Communicates about the fee reimbursement process clearly (how reimbursement is determined and how quickly reimbursements are provided to the policy holder).

Practitioner’s perspective

Dr. Doug Kenney writes the blog Your Pet Insurance Guide to help pet owners and others understand the industry.

Currently an associate at Houston Levee Animal Hospital in Cordova, Tenn., Dr. Kenney remembers having brochures for Veterinary Pet Insurance at another practice back when VPI was the only company offering pet health insurance. Over the years, he started seeing brochures for other companies.

He didn’t know what to recommend and decided to do more research. Eventually, he self-published a book and started his blog to share what he’d learned.

“I think probably a small percentage of veterinarians are pretty familiar with pet insurance, and there are a lot of veterinarians who probably still aren’t that familiar with it,” Dr. Kenney said. “We’re all going to need to get familiar with it because, I think, the pet insurance industry will keep growing.”

He said more pet owners will purchase pet health insurance as increasing technology and specialization in veterinary medicine continue to lead to higher fees for veterinary services.

In Dr. Kenney’s experience, some veterinarians have concerns that pet health insurance could go down the road of managed care. At the same time, he knows veterinarians see pet owners every day who cannot afford optimal care for a pet or decide on economic euthanasia.

Some pet health insurance even covers hereditary conditions, although most does not cover pre-existing conditions.

“Because most pet insurance companies now offer choices of maximums, co-pays, deductibles, and various optional coverages, it’s possible to get a good policy at an affordable premium,” Dr. Kenney said.

Advancing the industry

Infographic: U.S. pet health insurance, projected market revenues
Source: Packaged Facts, October 2013

Representatives of U.S. and Canadian companies that offer pet health insurance came together in 2007 to form the North American Pet Health Insurance Association. Now, NAPHIA represents 85 to 90 percent of policies underwritten in the United States and Canada.

“The idea behind the association was to help advance the industry in general,” said Kristen Lynch, NAPHIA executive director. “Each company is going to promote a product or a particular philosophy of underwriting that they believe in and that they think is best for the pet. But in general, it’s a relatively small industry, and there’s a long way to go in educating not just the public but also the veterinary profession about how pet insurance works, what kind of impact it can have on a practice, and those types of things.”

NAPHIA has established working groups on regulatory reform, anti-fraud measures, research and benchmarking, and veterinary affairs. Among the goals for the working group on veterinary affairs is collecting data about the impact of pet health insurance on veterinary practice.

Lynch mentioned that a big trend in pet health insurance is “white labeling,” or branding under other names to play off the popularity of those brands. These names include Geico, the American Society for the Prevention of Cruelty to Animals, and Wal-Mart in Canada.

Another big trend is pet health insurance becoming an employee benefit. Employers don’t pay any part of the premiums but do offer a discount on premiums by contracting with a company that offers pet health insurance.

Lynch said, “If you consider the impact that insurance had on dentists and on the dental profession in the last 20 years, that’s really what we’d like to see happen to the veterinary field and to the veterinary industry—that everyone has insurance, and everyone uses it, and vets benefit from it. Vets see not only greater income but the ability to practice optimal care instead of economic care.”

A 2013 NAPHIA survey found that pet health insurance continues to grow. Participating members reported a mean annual increase in gross revenue from written premiums of about 13 percent from 2008-2012.

Veterinary Pet Insurance

VPI has been in business since 1982 and remains the largest company offering pet health insurance in the United States. The founders were veterinarians who remained shareholders until 2008, when longtime underwriter Nationwide bought them out.

Infographic: Largest companies, by percentage of gross written premiums
Source: Packaged Facts, October 2013

In the experience of Dr. Carol McConnell, VPI vice president and chief veterinary officer, acceptance of pet health insurance has increased among veterinarians as a way to help pet owners pay for veterinary care.

“I would say that pet owner awareness of insurance, meaning that it even exists as an entity, has skyrocketed,” she said.

Dr. McConnell said some pet owners have misperceptions of the product, however. They mistakenly think of it as an investment that should pay them back more than they put in. Additionally, they think the premiums seem high in relation to the premiums for human health insurance they pay through their employer, not remembering that their employer contributes to the latter.

VPI has developed a wide variety of plans. For dogs and cats, the company has comprehensive plans that cover accidents and illnesses including hereditary conditions and economical plans that cover accidents and illnesses not including hereditary conditions. An injury plan for dogs covers accidents only, while the Feline Select Plan covers 15 common conditions in cats.

In 1998, VPI started offering a wellness rider to cover routine veterinary care as an add-on to the base policies. In 2002, the company came out with health insurance for birds and exotic pets.

Dr. McConnell said all of VPI’s plans follow a benefit schedule, much like dental insurance. The benefit schedule lists how much the company will pay for conditions after the policyholder pays a deductible.

“Because of our benefit schedule design, we can then assure the pet owner that her month-to-month premium is pretty stable,” Dr. McConnell said.


Up-and-comer Trupanion follows a rather different model than do many other companies that offer pet health insurance in the United States. Trupanion has its own underwriting company, pays 90 percent of veterinary costs for accidents and illnesses including hereditary conditions, and just started to offer direct payment to veterinarians at the time of invoice.

Trupanion provides one comprehensive plan for dogs and one comprehensive plan for cats. The company touts the simplicity of the plans as a selling point.

Maxwell the cat
While Maxwell’s story does not have a happy ending, his owner thanked Trupanion pet health insurance for helping give Maxwell every chance possible. Veterinarians sequentially diagnosed anemia, a kidney cyst, Evans syndrome, and restrictive cardiomyopathy in Maxwell. His owner made the decision to euthanize him after Maxwell did not respond to treatment. (Courtesy of Trupanion)

Dr. Kerri Marshall, Trupanion’s chief veterinary officer, said the company has paid veterinarians directly since its beginnings in 1999 in Canada. In January 2013, the company launched Trupanion Express, software that interfaces with practice management systems to allow direct payment to veterinarians at the time of invoice.

“We’re working to make sure that as insurance becomes more normal and more popular with pet owners—and really a necessity because of the level of care—that we also don’t add administrative burden to the veterinary hospital,” Dr. Marshall said. “So we’re working really hard to make sure that we build and invest in technology and in business processes where we do the work for them rather than making the veterinarian bend their medicine to insurance.”

In an analysis of 83,908 insured and uninsured pets, Trupanion found that the mean annual revenue for veterinary practices increased from $437 per uninsured pet to $837 per Trupanion-insured pet, while mean annual visits increased from 2.4 for uninsured pets to 4.4 for Trupanion-insured pets.

Dr. Marshall believes the Trupanion model will help lead to pet health insurance becoming the norm. “Then veterinarians will really see a huge shift in their ability to do quality veterinary medicine,” she said.

What’s next

According to the 2013 Packaged Facts report, widespread consumer acceptance of pet health insurance is still an uphill battle.

Infographic (dog owners and cat owners pie charts): Among pet owners without pet insurance …
Source: Packaged Facts, October 2013

A 2013 consumer survey by Packaged Facts found that the top reasons that pet owners who were aware of pet health insurance had never gotten a policy were a general sense that such policies were not necessary, the sense they were not spending enough on pet health care to make getting a policy a concern, not wanting to spend the money for a policy, and the confidence that they could cover pet health care expenses without a policy.

Among pet owners who formerly but no longer carried pet health insurance, the top reasons for cancellation or nonrenewal of coverage were a sense that the policy was not worth the cost, the decision that the policy was not needed, and cutting expenses.

Many pet owners don’t understand just how much veterinary care can cost, said Dr. David B. Goodnight, a senior consultant for Brakke Consulting who has a background in pet health insurance.

According to the 2012 Brakke Pet Owner Channel Use Study, pet owners found the acceptable range of monthly premiums for pet health insurance to be between $19 and $28. According to NAPHIA, policies to cover accidents and illnesses actually had a mean monthly premium of about $36 per pet in 2012, while policies with embedded wellness had a mean monthly premium of about $85 per pet.

Dr. Goodnight said the industry needs to encompass more healthy pets to keep premiums manageable.

“We need even more growth if we’re going to start achieving some kind of critical mass of pets covered in the United States,” he said.

Claims for pet health insurance run the gamut. The dogs below are Stella, who could not resist a half-full can of green beans with a partially detached lid; Noodle, who survived nasal arterial bleeding; and Hashbrown, who recovered from leptospirosis

Stella the dog
Courtesy of Veterinary Pet Insurance


Noodle the dog
Courtesy of Trupanion


Hashbrown the dog
Courtesy of Trupanion