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Even as pet ownership booms and sales of health insurance for dogs and cats grow apace, most U.S. states have no consumer-protection rules specific to pet insurance.
Little by little, that's changing.
This spring, Mississippi and Washington became the third and fourth states, respectively, to adopt laws governing pet insurance. The first was California, in 2014. Maine was next, in 2022.
By and large, the laws in Maine, Mississippi and Washington follow a model pet insurance law adopted last August by the National Association of Insurance Commissioners (NAIC). The model requires that insurers make clear disclosures about exclusions; restricts and prohibits waiting periods for certain conditions or circumstances; makes a sharp distinction between wellness plans and insurance; and specifies training for people wishing to sell pet insurance, among other provisions.
In adopting the model, the NAIC — whose voting members represent the 50 states, the District of Columbia and five U.S. territories — signaled a desire for consistent rules on pet insurance across the country.
Pet health insurance is a curious product because it seems analogous to health insurance for people, but the rules governing health insurance are completely different. There is no Affordable Care Act for veterinary patients. Instead, pet insurance is classified as property and casualty insurance.
As of 2022, nearly 4.9 million dogs and cats were covered by pet insurance in the U.S., according to the trade group North American Pet Health Insurance Association. That's a small proportion — about 3% — of the roughly 150 million dogs and cats in the country, but sales of pet insurance have been rising steadily for at least a decade.
As more people began buying policies, complaints followed over issues including fast-rising premiums, disagreements about whether a condition is preexisting and extended waits for claims payments.
The rise of consumer concerns led a number of states' regulators, working through the NAIC, to push for a uniform approach.
California's statute, having preceded the NAIC model law, is less exacting and mostly focused on disclosures.
The model law, by comparison, gives buyers the right to examine and return a policy for a refund within 15 days. It requires insurers to explain the basis or formula by which claims payments are determined. It prohibits waiting periods for accident coverage and limits waiting periods to 30 days for illnesses or orthopedic conditions not resulting from accidents. Wellness programs cannot be marketed as pet insurance and cannot be marketed when pet insurance is being sold, solicited or negotiated.
Recent laws and rulemaking
Mississippi's law, which went into effect July 1, is an abbreviated version of the model law. It doesn't ban or restrict waiting periods, for instance, nor specify the training required of individuals selling pet insurance.
Sen. J. Walter Michel, a bill co-sponsor and chairman of the Senate Insurance Committee, said lawmakers were wary of dictating business decisions. "You can't force a company to go out of business covering stuff," he said.
However, the law gives latitude to the state insurance commissioner to add details. "We're part-time legislators, and he's got to enforce the laws full-time, all year long," Michel explained.
Regulations proposed by the Mississippi Department of Insurance fill in provisions from the model law, including the restrictions on waiting periods. The proposal is open for public comments through Friday. If adopted, the regulations take effect Jan. 1.
The Washington law similarly goes into effect Jan. 1. Like Maine's, Washington's hews to the model.
Pet insurance bills were introduced in at least three other states — New Jersey, Pennsylvania and Rhode Island — during their most recent legislative sessions but did not reach the finish line, judging from the states' respective legislative websites.
Aug. 4 update: Mississippi has finalized pet insurance regulations authorized by and expanding upon the new state law.
Aug. 16, 2024, update: According to tracking by the NAIC, four more states have adopted laws based on the model. They are Delaware, Louisiana, Nebraska and New Hampshire.