Pet Economics 101 Why I buy into pet health insurance…but don’t actually buy it

Like many veterinarians with a bugaboo about access-to-care issues for pets of all stripes, I really like the idea of pet health insurance. Though the veterinary industry at large is still suspicious of what insurance for veterinary expenses might mean for the future of veterinary medicine (reference veterinary incomes), I’m optimistically gunning for the pet health insurance market to take its place in my world.

Of course I hate the stress of having to fill out more paperwork. I hate having to remove small lumps to ensure their benignity before people can have their pets qualify for a policy. I hate having to fear the possibility of the onerous managed care reality that pervades human medical decision-making. But if it truly means my patients will get better care…who am I to stand in the way of progress?

And that’s the rub…will my patients get better care? Right now the answer is a resounding, “YES!” Those of my clients with pet health insurance policies have yet to deny the treatment regimens I’ve recommended—even if it means seeing an expensive specialist. They’ve ALL been willing and able to make up-front payments out of pocket and rely on pet insurance company reimbursements on the back end. I don’t believe these clients would have so graciously parted with their funds without the prospect of reimbursement.

As Christie Keith on PetConnection says in this week’s popular post on her pets’ health insurance policies,

“Even if I weren’t ahead cash-wise — and I am — I can tell you that my decision-making process has become much, much easier lately. I mentally whack about half off all Kyrie’s vet bills, and all Rebel’s covered ones (he has two pre-existing conditions that are not covered), and in these scary economic times, I can’t tell you how much of a relief it is to not have to make my pets’ health decisions with my pocketbook instead of my heart.”

It’s that kind of human reaction to the presence of pet health insurance that I seek when I recommend that my clients do their homework on pet health insurance. In so doing, I believe I’m steering my clients to a new way of thinking about their pets’ health. Even if it doesn’t yield big fruit, as in Christie’s case, it provides the peace of mind required to make sound decisions about their pet’s healthcare…without having to rely on many of the financial entanglements they’d ordinarily confront.

After all, the budgeted expense of a monthly pet health insurance payment is easier on most people than the discipline required to set money aside—which is my preferred approach if you ask the financial analyst in me.

For the record, the realist in me also knows that neither savings or new monthly expenses are likely to hold sway in this economy. But our pets’ healthcare crises take no heed of economic times, unfortunately. Somehow, some way, those bills will get paid…or our pets will feel the brunt of it.

Though you may dispute it with some success, this holds true for veterinarians, too. As I’ve discussed ad nauseum on Dolittler prior to today’s post, we animal medical providers are not immune to the slings and arrows of outrageous vet bills.

Dispute that? Reference the thousands of dollars that flew out of my checking account earlier this year when Sophie’s brain tumor needed radiation therapy.

Reference my Vincent’s expensive upkeep, which I’ve detailed in a post here.

Sure, you can argue that the basics for veterinarians’ own pets’ healthcare are covered with minimal expenses, yet drugs and products are still expensive. And when our pets get really sick only the specialists among us get the best breaks (OK, and maybe the specialists’ girlfriends, too).

It’s because I get such great breaks and still have trouble paying my vet bills that pet heath insurance seems like such an imperative for my clients. If I can’t pay easily, with my better than average income and steep discounts, how can I expect my clients to?

And WHY don't I policy shop for my own pets? Let's just call it inertia. What's your excuse?

It may be that you’re unconvinced of the benefits of pet health insurance. You may be loath to shell out an extra X dollars a month for no certain return. But consider the rising cost of veterinary care (reference the previous post). Can you afford NOT to insure your pets?

January 5th, 2009

Add Comment35 Comments

What's your excuse?

When I first looked into pet insurance, they wouldn't insure dogs past the age of 7, even if they were already insured. We had pet insurance for a few years, but then the dogs got older and we dropped it... my youngest dog is 10 this year. And now, thanks to this blog, I know that pet ins is more varied than it used to be and there are companies that might have sinured out dogs... they all have pre-existing conditions that apparently mean we can't get insurance on them anyway (from going through the various quote systems on pet ins websites).

Rats.

Galadriel January 5th, 2009 11:49:54 AM

So far my strategy of just keeping a $5000 savings account for my dog has saved me the considerable cost of insurance--because as a disgustingly healthy collie mongrel his vet costs over the last five years, other than routine worming and vaccinations, have been nil.

vein January 5th, 2009 11:57:28 AM

Because of the improved policy availability & coverage, if I were starting out with one or two pets, I would definitely be shopping for coverage

Unfortunately, when those policies became available, I already had multiple pets in middle to advanced age and the total premiums were prohibitive.

I've resigned myself to taking the "blows" of expensive needed care as it comes, using my trusty VISA to cover the gap. The percentage of my net income spent for care is pretty high, but I don't indulge in much other friviolities beyond basic, and some call, "frugal living".

I advocate to consider purchasing "pet insurance" for most 'normal' pet-owners, upon careful review of restrictions & exclusions.

I am sure glad to have health insurance for myself, never using it and taking it for "granted" in my younger years, but always knowing it was there for "safety and catastrophe"

Barbara A. Albright/life-long NH resident

Pocket's Story from NH January 5th, 2009 12:23:15 PM

"Those of my clients with pet health insurance policies have yet to deny the treatment regimens I’ve recommended—even if it means seeing an expensive specialist. "

I wonder though, if those who are willing (able?) to purchase insurance would have chosen to follow your recommendations anyway?

laura January 5th, 2009 12:28:20 PM

My excuses are:

1. I am in denial about the possibility that my indoor cats will suffer the kind of one-time big injury this type of insurance typically is good at covering;

2. I am most concerned about costs related to chronic diseases associated with old age, and most of the policies either don't cover these or have a cap in place that would limit coverage.

When I do the cost analysis on those assumptions, it comes close to a break-even in terms of adding up deductibles and insurances payments + cost of uncovered care vs. covering it all myself.

Break even, IF that.

The only problem arises when my assumptions prove wrong.

I almost signed up for your friend's insurance earlier this year. It would have cost me hundreds a month to cover all my pets, but I was so close to doing it and clicking that button. Then I saw the limits on chronic disease coverage (I think it was 2.5Kk, which you can spend in less than a week with hospitalization for a major illness).

So I figured, nah. My pets don't go outside they won't get injured, and this is basically injury coverage.

My assumption was wrong. My youngest cat at a thread. So, that was the kind of thing that would have been covered. Surgery and $4k later . . . now I guess he's "pica" and future ingestion of such objects would be considered pre-existing and not covered.

So, therefore, even though I regret not having pushed that button to enroll, I don't know that I will do so now . . . it's pre-existing. (Yes, I'm assuming my other kitties won't have such an injury -- may be another erroneous assumption.)

Bottom line: We don't buy insurance unless we figure chances are good we will get more coverage out of it than we will pay money into it.

However, companies will structure their coverage to try to make sure the reverse is true -- they will recover penny for penny what they pay out, at a minimum.

Stefani January 5th, 2009 12:37:48 PM

Here is an example of cost-benefit analysis. You reallly have to pay attention to exclusions . . .

This is VPI's optional wellcare protection premiere policy, which is an "add on". The annual coverage maximum is $400, as follows, with notes on whether or not I would likely claim coverage for one of my cats:

$60 For two wellness exams (I therefore conclude that it's only $30 for one. My cats are currently in good health, and have annual exams, although the older ones may switch to 2x year. So, coverage would be $30-$60 for me. $35 For any vaccination or titer of your choice. (My cats get only rabies every 3 years, plus the distemper if they go in for a dental. So let's say I only take advantage of this every two years for each cat. $0-$35 coverage.) FELV, FIV, Heartwom tests - $30 (Not likely to do these. All indoor cats negative) Fecal - $15 coverage. (Rarely do this. $0 for me) Deworming - $20 coverage. (Have never needed this since they were kittens. $0 for me) Microchip - $20. (I think this was already done . . . $0 for me) Coverage for bloodscreening or xray or EKG. $50. (I would use this every year, $50 coverage). Flea preventative, $50 coverage. (I don't use this unless I see fleas. $0 most years for me). Urinalsis - $20 coverage. (I'd use this every year for the older ones. $20.) Dental cleaning OR spay/neuter. $100. (They don't ALL have dentals every year, but lets say yes to this -- $100). So, out of the total available $400 benefits max I would use $200-315 a year, depending. The coverage costs $264 a year (at $22 a month). Some years, coverage would cost me $64 more than it paid (most years, really). Other years it would save me $51. But even then, there is the annoyance of having to file reimbursement claims.

Cost benefit analysis tells me, nah, not worth it.

Stefani January 5th, 2009 01:18:18 PM

Stefani: I'm partial to the high-deductible plans myself. For the basics I believe all pet owners should budget wisely and pay for them. My fears, and the reason I'd want PHI for my pets, relates to the big-ticket items few of us can pay for out-of-pocket. I swear I'll get a policy this year. I swear...

Dr. Patty Khuly January 5th, 2009 03:16:57 PM

Count me among those who purchase pet insurance. I've insured my pets for the past 8 years, and the coverage has frequently paid for itself. The peace of mind knowing I won't have to make my pets' health decisions based on cost has been priceless.

karen January 5th, 2009 05:04:44 PM

Dr. Patty Khuly January 5th, 2009 05:07:57 PM

I might consider pet insurance if it meant that I paid a deductable and they covered the rest. However, it seems to me that all of the policies that I've seen involve a person coming up with the up front cost and paying the vet, and then getting paid back for some part of it.

Which means I'd still have to have the money for emergencies, and would not be paying out for peace of mind, but rather for some amount of payback several weeks in the future. That plus the relatively high cost for multiple pets makes it not worth it for me.

Stephanie January 5th, 2009 06:30:27 PM

I considered insurance for Joella, my Service Dog, 6 yrs ago. But she'd already been seen for an ear problem and had panowhateveritiscalled. So they wouldn't have covered her for any ear related care and were unclear on what they'd cover orthopedically. I decided it wasn't worth it and instead put away a chunk of change into a savings account.

PaulaO January 5th, 2009 06:47:54 PM

After my old guy needed two sugeries (one with the specialist and involving MRIs and other expensive options) for a carnassial abcess and retrobulbar abcess, I looked into PHI. The surgeries, which cost me close to $3000, would have been reimbursed for about $400. The first surgery, with my vet, was over $800. It just didn't seem worth the cost to me to get insurance.

I do have a savings account that I plop money into every month to cover vet expenses. Makes more sense to me for my money to gain me interest until I need it.

Nita January 5th, 2009 09:43:47 PM

I use insurance in a few different ways; I activate the free 60 days AKC insurance on all new pets, keep insurance on all my pets the first year via either AKC plan or PetsBest - the free 60 day AKC plan really helped me when a pup suffered a severe eye injury. Right now I keep the young ones insured as it seems it is within the first 12 months that accidents happen, then I re evaluate when they hit 5 years for those health issues that hit older dogs. Sometimes I have one dog who I just know is gonna have "badluck" so I will insure them past 12 months. It's a gamble, so far I have been pretty efficient (or lucky) in my choices of when to insure and whom to insure. Overall I have been very happy with both AKC and PetsBest. I recommend to all friends who have a puppy to get insurance at least for first 12 months. Adopted dogs can also get the Shelter Insurance which I haven't used but have heard good feedback.

FYI - There are some plans that do cover pre existing conditions after a waiting period

LC January 5th, 2009 11:54:52 PM

I think it's a mistake to analyze insurance by seeing if you will "break even". I pay for insurance year after year on my auto and my house and have yet to get a penny of that money back - and I'm glad of that fact because it means I haven't been in an accident or had my house burn down. Insurance is most important to protect you against financial hits that you cannot afford, like losing your home, high medical bills, disability etc. It's nice to have insurance that pays for all kinds of little things and it would be great if we could all get back more than we contribute but it can't possibly work that way! In the long run it's almost always more economical to pay for those things ourselves, and have insurance for the big stuff. If I were in a situation where a vet bill could wipe out my savings, I'd definitely get pet insurance, but at this point I have credit cards to cover an emergency and there's no question that money is not going to be the deciding factor. If I do get it in the future I'd pay for routine costs out of my own pocket and opt for the high deductible type of insurance that covers the unexpected, expensive situations. That's what insurance is for, to protect against the unpredictable and hope you never need it.

Anne January 6th, 2009 12:48:19 AM

When I first got my doxie puppy four years ago, we looked into pet insurance, but there were so many things not covered, and you really had to read the fine print to find them, that it didn't make a lot of sense to me.

For older pets, it's either not avaliable or again so many things not covered...I think it is a process that is slowly growing, but isn't quite there yet. Pet insurance needs to me more comprehensive and less costly and that is a double edged sword, for it to be that, they need more people to buy it and to buy it, it needs to be better.

I say that if you have $200.00 a month for pet insurance, put it in a savings account and manage it yourself. Be religious with it and don't use it for anything but your pet.

But that's just my 2 cents.

http://lorrim-fip.blogspot.com/

LorriM January 6th, 2009 12:55:25 AM

I have insurance for all three cats and if a new one came in they'd be added. I lost the oldest to cance because I couldn't afford the treatments. As soon as that happened I put the younger one on insurance and as each one came I added them. I keep threatening to cancel it because I pay the premiums and only get a percentage back on their exams and vaccines, but then hubby will remind me that should, God forbid, one of them become ill or have an accident we could afford to treat them. In fact, we convinced a neighbor to get insurance for her cat and he got hit by a car. Yes, he was one of those "inside only" cats. Without the insurance she couldn't have had the surjery to fix his diaphram, broken leg and the hospital stay afterward. He was only two at the time, she would have been devistated if she had lost him.

Donna January 6th, 2009 02:03:48 AM

I say that if you have $200.00 a month for pet insurance, put it in a savings account and manage it yourself. Be religious with it and don't use it for anything but your pet.

I'm paying just over $200 a year for insurance for my dog. If your pets are young and healthy, now, look around, read the polices, compare--go to the Pet Insurance review website. Not all plans are available everywhere, but the situation has changed a lot in the last few years, and there's a much better chance of finding something suitable.

Lis January 6th, 2009 08:15:44 AM

I think the break even point and the maximum coverage are both things to look at. But so far neither has made sense for me. Similar to my work's dental and optocal plans. They just don't cover enough of the "distaster" events to be effectively helpful should the worst happen. Now if dog health coverage was more like human health coverage maybe I would get some.

emily January 6th, 2009 10:33:15 AM

You also have to be honest with yourself about how good you are at paperwork.

Filing for those reimbursements . . .

Not that its hard, but it takes time and some level of organization. What's the chance that receipts will lie around and lie around waiting to be mailed?

Stefani January 6th, 2009 11:12:42 AM

I agree, Lis. The plans are much more sophisticated now. You have cancer riders, geriatric coverage (and enrollment), genetic disease coverage, exotics policies, high deductible/catastrophic coverage and other kinds of policies. Doing your homework is the hard part--maybe that's some of what spawns the inertia for me.

Dr. Patty Khuly January 6th, 2009 11:44:18 AM

I'm territory partners with Trupanion (Vetinsurance in Canada). I agree that homework is always the difficult part. It can be daunting when faced with pages of policy terms and conditions and exclusions.I do my best to educate the veterinary community on pet health insurance and in turn they pass on their two cents to pet owners. We've tried to make research for pet owners simpler by including a comparison chart on our website that compares Trupanion with our competitors. www.trupanion.com. There is also a third party independent website www.petinsurancereview.com where pet owners can write reviews on various pet insurance companies in North America.

Karen January 6th, 2009 12:59:10 PM

I had insurance on Agadore. Had it 4 years with no claims. Finally made a claim for $84. Within 3 months, my premium increased by about $5 per month. I cancelled it and decided that I would be better off using care credit or my credit cards. I don't mind paying for a service. But I think one claim in 4 years didn't justify an increase in my premium.

agadoresmama January 6th, 2009 04:06:00 PM

Insurance, of any kind, only works if you make the same decisions that you would without it; if you treat it the same as if it were coming out of your pocket – because it does (through those premiums). One of the biggest reasons why home, auto, human health insurance costs have skyrocketed is the “it’s covered” by insurance mentality so go ahead and do it; don’t be as careful as you would if you’d have to pay out of pocket and certainly don’t take responsibility for reviewing billings and objecting to overpayments. Right now the policies require payment that is followed with reimbursement, the way we used to do human health insurance too, but it won’t be long before Vets accept assignments of benefits and then are paid directly. When that happens, Vets will have to pad bills for the claims that don’t get paid just as M.D.s have to do.

IMO, all insurance should be just for catastrophic losses AND should mandate ordinary, reasonable, annual care as a prerequisite to catastrophic coverage. I pay cash for my vehicles and only carry mandated insurance (and long for the days of self-insurance, posting of securities, instead) and for my real estate. This avoids most required insurance and I save for anticipated losses; carrying only catastrophic loss policies at best and evaluating risk before even doing that as I see no reason to pay an insurance company up front and let them have a profit when all that could be in my account for use against the losses and leverage for my profits instead of theirs. I know that’s a curve that’s difficult to get in front of because it involves self denial in the early years and we live in an “I want it all, NOW” society but, gee look where that’s got our economy now.

PJBoosinger January 6th, 2009 11:02:50 PM

OK, somebody explain why my post did that please. Because I draft in Word maybe?

My tech skills went bye bye with my strokes and they're darn slow coming back!

PJBoosinger January 6th, 2009 11:05:55 PM

My 2 Dachshunds are insured with Pet Plan USA and Pet's Best. I researched pet insurance at nauseum before selecting these 2 insurance companies. I have money in the bank and even has a saving account specifically earmarked for Beemer and Austin. I agree with other posts that suggest pet insurance should be used for catasttrophic issues. I don't use if for routine check up and blood work. I'm really only keeping them insured in the event they need a IVDD surgery, cancer treatment etc.

Greg Resnick January 7th, 2009 03:21:07 PM

I have my pit bull insured with Embrace - I've never had to use it yet, but I'm glad it's there. For only $30 a month I get extreme peace of mind. I know too many people whose dogs were fine one day and then the next needed thousands of dollars of vet work. I know too many people who have had to say no to cancer treatment for their dog because they couldn't afford it. I will never have to say, "euthanize her because I can't afford the treatment" and that means a lot to me.

Liz January 7th, 2009 08:15:14 PM

It seems no one is willing to say it, but at what point do you throw in the towel? If my heart goes, I'm going to die. I would not let my wife sell the house to buy me a transplant and ruin her economic future so that I could live another year. Why are we fighting mortality as though it is something that can be avoided indefinitely? Why do we treat death as unnatural? The alternative to paying for your pet to have a $5,000 surgery is not to do it. It may be very sad, but it is not the end of the world. Three-legged dogs don't feel sorry for themselves. I know. I know. If I have the money in the bank, I'll probably spend it. But is it really for the sake of my dog and cat? Or am I acting out of selfishness and guilt, projecting on my animals something that they do not experience?

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