Clarity sought for pet health insurance programs

Calif. bill attempts to regulate indemnity plans for pets

July 23, 2010 (published)
By Jennifer Fiala

The murky waters of pet health insurance might soon clear up for California consumers, should state lawmakers pass a bill designed to lend transparency to the parameters of programs offered in the state.

A California Senate appropriations committee is next in line to consider AB 2411, originally introduced by Democratic Assemblyman Dave Jones, a candidate for state insurance commissioner who is pushing roughly a dozen insurance- and healthcare-related measures this session.

Passed by the California Assembly last month, the bill is the first of its kind in the nation. More than a dozen pet health insurance businesses exist nationally, yet just an estimated 1 percent of all owners in the United States buy coverage for their pets. While opinions of pet indemnity programs vary among veterinarians, the industry as a whole has a checkered track record.

If passed, AB 2411 would require insurers to provide specified reimbursement for covered veterinary expenses and spell out the terms of programs on sales and solicitation materials.

Ideally, that means California pet owners in the market for insurance would be able to visit an insurance company's website to better comparison shop and learn exactly what its policies cover before being blindsided during an emergency.

The measure also gives pet health insurance its own status in the state's insurance code separate from how it currently is categorized as miscellaneous property and casualty. The distinction could give consumers an easier route to filing and researching complaints against pet health insurance companies.

Lawmakers' attention to the pet health insurance industry is being praised by those who believe third-party payers need more oversight. While growth in the market remains slow, the industry is expected to proliferate considering that mounting education costs, rising medical standards and pricey equipment have pushed the cost of veterinary care upward, out of reach for many owners whose incomes have failed to keep pace.

The California Veterinary Medical Board joins the Humane Society Veterinary Medical Association in support of the legislation.

However, the California Veterinary Medical Association, which represents the majority of the state's 7,000-plus licensed veterinarians, has adopted a watch position on the bill. "We don't know that this one will have a big effect on our members," Executive Director Valerie Fenstermaker says.

The American Veterinary Medical Association (AVMA), the nation's largest membership body for veterinarians, penned pet health insurance policy guidelines in 2008, while announcing a widely criticized partnership between the group's health insurance trust and Pets Best Insurance, a private company. Though the controversy has since quieted, the AVMA has not publicly addressed the California legislation. The group supports the benefits of pet health insurance to "help defray the cost of veterinary medical care."

Still, many veterinarians remain leery of such indemnity programs, which smack of the managed healthcare debacle that plagues human medicine. The Veterinary Information Network (VIN), an online community for veterinary professionals and parent of the VIN News Service, is riddled with complaints about various pet health insurance companies. Fears exist that third-party payers will one day become as burdensome for DVMs as they are for MDs, though pet health insurance companies typically reimburse owners, not practitioners, giving them less ammunition to dictate doctors' fees, services or diagnostics.

Additionally, some owners — including at least one veterinarian with policies covering her own animals — report that they've been burned by pet health insurance companies. Programs that operate within an 80:20 reimbursement structure especially have been criticized for a reported unwillingness to reimburse the insured a full 80 percent of claims when a practice's charges are deemed overly expensive. Others lament that some stipulations on pre-existing conditions are unfair and poorly advertised.

AB 2411 originally barred companies from excluding coverage based on pre-existing conditions for a period beyond six months following the insured's effective coverage date. That language has since been stricken from the legislation's latest version.

Gary Lucks, an attorney in the San Francisco Bay Area, says he didn't learn that his insurance company — VPI Pet Insurance — deemed his veterinarian's charges as overly expensive until his Golden Retriever Bodie was diagnosed with cancer. While he expected VPI to reimburse him roughly 80 percent of the $5,000 he paid for the dog's treatment, he received just a small portion of the claim.

A strongly worded letter to VPI reportedly garnered Lucks the remainder of what he was due. With that $3,000, Lucks hired research staff to put together a policy paper on the pet health insurance industry that led to the creation of AB 2411.

While proud of the accomplishment, Lucks says the bill's language does not go far enough. Of pet health insurance companies, he states: "They low-ball the schedule of costs knowing that the average consumer is not going to know what's typical. It's weighted for a one-side win for them."

VPI spokesman Curtis Steinhoff could not be reached for comment, yet the company is on record supporting AB 2411. In a recent article by the Associated Press, Steinhoff is quoted as saying, "We'd rather have people know what they're purchasing so that they're not surprised when they go to use it."

Lucks finds that comment "confusing." He says of VPI: "They over-promised and under-delivered. They know that the majority of people would not have the tenacity to challenge them. It was fraud and misrepresentation.

"I would never carry pet insurance again. It's basically theft," he adds.

Dr. Frances Wilkerson, a practitioner in Illinois and VIN member, has heard complaints like that in the past. To educate her clients, she studied the ins and outs of pet health insurance programs for more than a year, launching a website last September to more easily inform clients of available options.

While Wilkerson recognizes that AB 2411 has been watered down, she considers it an excellent start toward creating pet health insurance-specific regulations.

"One of the biggest problems with pet insurance is that the information is not easy to decipher, and this bill addresses that," she says.

VIN News Service commentaries are opinion pieces presenting insights, personal experiences and/or perspectives on topical issues by members of the veterinary community. To submit a commentary for consideration, email

Information and opinions expressed in letters to the editor are those of the author and are independent of the VIN News Service. Letters may be edited for style. We do not verify their content for accuracy.