I've invited Sara, a reader of my blog, to share a guest post with you today. She will share her story about why she decided to research pet insurance companies again after having a policy with the same company for 14 years. The insights she shares are valuable whether you are considering pet insurance for the first time or considering switching companies.
Some of you may have looked at pet insurance for your pet several years ago, but like Sara, you aren't aware of all the various companies and options available today. I hope after reading her story, you'll have a greater appreciation of the importance of researching companies and policies before choosing one to insure your pet. I invite your observations and comments as it relates to your story.
I was an early adopter of pet insurance. I have had a policy with Petshealth pet insurance since 1999. (Petshealth is part of The Hartville Group which also administers ASPCA pet insurance plans.) I was always glad I had a pet insurance policy. It provided assistance with routine wellness care, coverage for small & medium incidents (ear infection, trip to emergency clinic) as well as an expensive terminal illness (cancer).
When I adopted my current dog in 2011, an almost 8-year-old English Cocker, I signed up again with Petshealth. At the time, I didn’t realize there were new pet insurance companies in the market. But after reading some of Dr. Kenney’s blogs, I realized there are some gaps in my current coverage and I set about to see if it made sense to switch insurers before my dog gets any older (he’s ten now) or develops a serious medical problem.
I was hoping to address the following:
- Improve coverage for conditions that cross plan years. With Petshealth, the first plan year a condition occurs, it is covered up to the limit on the policy. If treatment is needed in subsequent years, the total coverage is restricted to the Continuing Care rider on the policy which has a much lower limit. Therefore, if a condition is diagnosed late in a plan year or an expensive chronic condition develops, I would have significantly less coverage in subsequent years.
- Improve coverage limit. When I enrolled my current dog, wellness coverage was automatically included in the higher limit policies instead of being an optional add-on rider. After doing some calculations, I determined that I couldn’t break even on the wellness coverage. In order to get a policy without wellness coverage, I had to get one of their policies with a lower per-incident limit. Now, I realize I would prefer to have a higher per incident limit. Their policies now have the option to purchase wellness coverage as a separate rider.
- Provide coverage for hereditary conditions. This is a risk that I have accepted for the last 14+ years. For most of that time, no company covered these items, but now many companies do offer coverage for hereditary and congenital conditions. Again with more knowledge, I would prefer to have coverage for these conditions.
- More reimbursement than 80% of usual and customary. My track record is about 15% of claimed expenses are excluded due to exceeding usual and customary costs. So I have about a 65% effective reimbursement rate. This is better than handling all the costs myself, but more companies are now reimbursing based on actual costs/invoice.
My dog does not have any significant pre-existing conditions, just a couple of minor on-going skin issues. I am willing to take over all expenses for those issues if I switched to a new policy.
The Process
I read a couple of Dr. Kenney’s blogs on PetMD.com. That led me to order his book Your Guide to Understanding Pet Health Insurance. Then I mostly followed the process Dr. Kenney recommended.
Data Gathering
I whittled down the companies pretty quickly by excluding those that either had significant exclusions on hereditary conditions or my dog was too old to qualify for a new policy. I considered policies from Pet Plan, Trupanion, Healthy Paws, Pets Best or staying with Petshealth.
I used materials in the Pet Insurance Toolkit to get a quick overview of companies and policies. I also plugged in quotes from different companies into the spreadsheets, played with different size claims to see net cost to me for each company’s approach. In addition, I plugged in quotes for different customizations of a policy – varied deductible, reimbursement percentage, policy limits to try to zero in on what would be the best fit for me.
I visited Dr. Frances Wilkerson’s website - Pet Insurance University to get another informed view on how policies worked at each company. Dr. Wilkerson reviews all the companies in the same outline format so it is helpful when trying to compare important aspects of a policy with each company. Plus, she boiled it down to the salient points and highlighted favorable and unfavorable aspects of the policies. (Dr. Wilkerson was a guest on a recent podcast.)
I visited each company’s website and not only got a quote for my pet, but also absorbed marketing material provided about pet insurance in general, benefits of the company’s approach and how they compared themselves to other companies and so on. I obtained sample policies and read through them.
I also called and chatted with customer service folks at each company. I asked for clarifications on how different aspects of their policy worked. Sometimes I called several times as I encountered different questions through my research. I described my dog’s current conditions and asked for some general guidance and the types of things that could be excluded as a pre-existing condition. If the company’s policy had a per-incident deductible or coverage limit, I described some experiences I had with my prior dog and asked how they would classify that set of events – as one or multiple incidents. Everyone I spoke with was very helpful. Talking through questions and different scenarios, I usually picked up a better understanding of the policy than I had acquired just by reading the document.
I read reviews on the Pet Insurance Review website. I usually started with the bad reviews and then skimmed good and great reviews. I wanted to know what other people complained about and gave thought to whether I would be comfortable with those issues. Some reviews were sour grapes around misunderstandings of how policy worked. But sometimes I learned about a finer point in the policy that I (and the reviewer) didn’t grasp on initial reading of the policy. I was also interested in how the insurance company responded to issues – did they acknowledge shortfalls, did they offer clarification on how policy works, did they ask for more information or offer to re-evaluate an issue for the pet owner for things that seemed like a legitimate concern. (Listen to the podcast episode with Mike Hemstreet, the owner of this review site.)
I enjoyed listening to podcast/interviews with representatives of different companies on Dr. Kenney’s website. I always took away a couple of tidbits about pet insurance from each of the speakers and it provided a valuable perspective on the people behind each company. It was a factor, for me, in deciding if I trusted the company and the folks running the business.
One of my concerns was the exclusion of hereditary conditions in my current policy, so I reviewed these conditions with my vet. I just wanted to get a sense of how likely my dog might be to develop any of these conditions through the remainder of his life. For the few conditions that are a possibility for my dog, the vet and I discussed the cost of treatment in broad terms.
Analysis and Struggle
I spent a lot of time contemplating which company and policies would provide me with good value.
- How would purchasing a policy that excluded exam fees from coverage affect my out-of-pocket costs?
- I have always had a $100 annual deductible. How would a per-incident deductible work for me? What size deductible should I choose for equivalent out of pocket expense?
- Should I forgo coverage for more likely small & medium incidents in favor a catastrophic policy – a stopgap against an extremely costly condition?
I spent some time thinking about how much coverage I needed. I looked at my past expenses and tons of claim examples on different pet insurance company websites.
I had about five years of veterinary invoices and explanation of benefits forms from past insurance claims in my files. I attempted to analyze how I would fare year by year and over the 5-year period if I would have had each of the policies I was evaluating. I considered:
- Actual pet health care expenses
- Annual premium for insurance
- What items would be covered and what would be out of pocket expenses
- The reimbursement the policy would provide, factoring in applicable deductible(s) and any coverage limitations
In some cases it was easy to compare, but others were a real pain to figure out calculations because the policies were so different.
I also looked forward and thought about coverage for the remainder of my dog’s life rather than just for the next year. I was thinking I might have no claims, or only small ones, for a year or two but I bet I would have larger expenses the last year or two of my dog’s life – more trips to the vet, consultation with specialists or sometime in the emergency clinic.
I will likely have my dog 2-5 more years based on typical lifespan of breed and family history. I made some educated guesses at veterinary expenses for each year and also included the number of incidents involved (one on-going or several different issues). Then I looked at what I would pay in premiums and get back in reimbursements to help me choose between the various alternatives.
At one point, I was not very excited about any of my choices. I was having trouble discerning whether I didn’t like my options because I had a less desirable applicant (older dog) or if the new policies just were not that enticing to me. So I decided to do some comparisons on insurance for my 4-year-old cat (a more typical applicant) to see if that would shed any light on the problem and help me make a decision.
To sum it up, I would say I really kicked the tires on all my options. Others might think I over analyzed the situation. (-:
What I Decided and Why … for my 10-year-old dog
At this point, I am planning to keep my existing Petshealth Care policy. I ultimately did not find the right combination of trade-offs to feel comfortable making a switch.
I seriously considered new policies with four different companies. Each policy worked differently and generally required me to give up things I liked about my current policy and/or accept something I was not very excited about in order to obtain additional coverage. When I really crunched the numbers, I could get better coverage for the worse-case scenarios but I felt like in doing so I was accepting more out of pocket (higher premium, higher/more frequent deductible, exclusion of exam fees, different reimbursement rate for specialist etc.) for the much more probable events.
It is hard for me to imagine encountering a $10,000 condition for my dog given his lifestyle and current health (although it is certainly possible). I am much more likely to have a couple of $1000 - 2000 incidents.
My Petshealth policy has helped cover the costs of a wide array of things over the years from ear infections to terminal cancer. So I have coverage for a broad range of things, I just have to accept it won’t address everything I might encounter and be prepared to pick up the difference if we are unfortunate and fall into a gap in my current coverage.
Another deterrent to switching policies was my dog’s medical records. My vet and I would say my dog is a pretty healthy 10-year old. However, I was quick to ask the vet to check out anything that seemed out of the norm at regular exams and much of that was noted in my dog’s medical records. If a company wanted to be nit-picky, they could probably find one or more comments in his records and interpret it as the first symptom of a condition diagnosed in the future and use it as a basis to deny a claim as a pre-existing condition. This also made me hesitant to switch policies.
I was concerned if I switched I could end up worse off. I might be denied coverage because a condition is deemed pre-existing, premiums increase much more than I expected, or I misunderstood an important facet of a new policy. With the years of experience I have with Petshealth, I know what to expect and understand how the policy works.
For my situation, the pluses and minuses of the alternatives were not attractive enough to risk a switch in companies. I would rather put additional money aside now, in case it is needed, than be upset and frustrated if something did not work out as I envisioned with a new and improved policy.
What I Decided and Why … for my 4-year-old cat
I have always had an insurance policy for my dog, but never got one for my cat. I am not sure why – maybe it just seemed like the kitties have fewer issues. As mentioned above, at one point, I threw the cat in the mix and looked at policies for her too.
Through the process of analyzing options for my dog I came to realize I have the following preferences:
- I prefer having wellness coverage. When insurance provides reimbursement for wellness care, I always feel like I get something out of the policy and have fewer regrets about spending money on insurance rather than banking premiums in a savings account. Perhaps it is a little irrational or not thinking properly about the purpose of pet insurance, but I like having coverage for good preventative care.
- I prefer an annual rather than a per-incident deductible. An annual deductible is easier for me to factor into my budget. I have usually had a variety of small/medium isolated incidents rather than on-going chronic conditions. So I suspect I would get hit with an incident deductible over and over again.
- I am comfortable selecting limitations on coverage (annual or per-incident). I really want a lower premium (known expense) in exchange for some limitation on coverage (which I am unlikely to exceed) rather than a higher premium for unlimited benefits. But if I did exceed those limits, I would be prepared to pick up the additional costs.
With that floating around in the back of my mind, when I came across Embrace Pet Insurance it was a no-brainer for me to get a policy for my cat. Embrace’s policy worked exactly like I wanted! The policy provides pretty comprehensive coverage:
- covers hereditary and congenital conditions
- covers on-going conditions - conditions that require treatment across plan years are covered up to annual maximum of the policy each year
- covers exam fees
- covers a variety of alternative therapies
I was able to select how much coverage I wanted - $5,000, $10,000 or $15,000 annually. The policy has an annual deductible and reimburses on a percentage of actual expenses (not usual and customary costs or a benefit schedule).
From top to bottom, I felt the company was exceptionally open and straightforward. They put a lot of effort into making the terms of the policy very clear and understandable to avoid misunderstandings about how the plan works and those unexpected gotchas.
Embrace’s approach to wellness coverage is phenomenal and totally sealed the deal for me. You pay a separate fee for the wellness plan. Then you are able to spend the wellness benefits on any combination of covered items with no per item limits on what will be reimbursed. So it is awfully hard not to come out ahead on this deal! I got the Wellness Reward Plus, paying $299 annually, and Embrace will reimburse me up to $400 for things like wellness exams, vaccinations, preventatives (heartworm, flea and tick), routine blood and fecal tests and so on.
And one last kicker, Embrace rewards healthy pets with a “vanishing” deductible – they call it the Healthy Pet Deductible. If you go a whole year without an accident/illness claim you earn a $50 credit toward your annual deductible. So if you selected a $200 deductible and go a year without a claim, the next year your deductible would be $150. If you were claim free another year the deductible the following year would be $100.
For me, with a 4 year-old cat that has not had any medical problems, I can easily envision that there will be years we only need to do wellness care. With my Embrace policy, I’ll be accruing a little extra bonus for our good fortune and save a few bucks on deductible when my cat does inevitably have an illness or accident.
Lessons learned and advice to other pet owners making decisions about pet insurance
Although I did not switch policies for my dog, I am glad I did the research. I am more aware of the pluses and minuses of different approaches and that helped me realize and accept the risks with my current situation. I am playing the odds a bit, but I have thought through what I would do in different scenarios and have a plan in mind. I am better off having done that now rather than in the middle of a crisis. And I stumbled on a policy I am really excited about for my cat. (My dog was too old for a new policy with Embrace.)
Probably the best advice I can offer is to do your research and find a policy you are comfortable with when your pet is young and healthy. Beyond that, I would like to share a couple of the “gotchas” I felt like I stumbled across along the way. The approaches are not necessarily right or wrong but I call them gotchas because if you do not understand the implications upfront you might be disappointed later on.
Definition of Pre-Existing Condition
No pet insurance policy covers pre-existing conditions. If they did everyone would wait until his/her pet is sick to buy a policy and there would not be any healthy pets contributing to the insurance pool and the whole system would fall apart. This is not like human health insurance where we are moving towards requiring coverage regardless of pre-exiting medical conditions. There are just so few pets insured (like 1-2% in the US) it is not economically feasible.
However companies differ in their definition of what they consider a pre-existing condition. Some companies require the observation of some kind of symptom of the condition either by the pet owner or veterinarian before the effective date of policy and any applicable waiting period. Other companies consider when the condition likely began to develop in the pet's body regardless of whether there were any indications of the condition that could be detected by a veterinarian or the pet owner.
It is difficult to definitely prove or disprove when a condition began. If my vet couldn’t detect the condition through semi-annual wellness exams and generally recommended diagnostics (blood work, urinalysis, fecal exams, etc.), I would want my pet insurance to provide coverage rather than assert the condition existed prior to the start of my policy.
There are other facets to consider as well. Some companies consider bilateral conditions pre-existing – if pet previously had treatment on right leg the company considers the same condition on left leg as pre-existing since pet may be predisposed to the condition. Some companies consider certain conditions curable and will provide coverage after the pet has been treatment free for an extending period (such as 6, 12, 18 months). Companies can also have different waiting periods for different conditions before they provide full coverage, for example, things like the expensive orthopedic conditions.
Therefore, make sure you understand the definition of a pre-existing condition in the policy you choose as it applies to you and your pet. The policy is stating upfront what it will not cover.
Exclude Coverage for Exam Fees
This surprised me a first. What? A pet insurance policy that doesn’t cover the cost of an examination by a veterinarian? But maybe it is a good approach to risk sharing between the insurance company and pet owner.
I initially guessed exam fees might be 10% of overall expenses. When I actually reviewed the last 5 years of invoices my exam fees ranged from 10-26% of annual expenses. For me, an average of 15-20% of costs was a lot to risk out of pocket.
Give some thought to your experiences, review past invoices, discuss the topic with your vet to understand what you are excluding from coverage and make sure you are comfortable with this as an out of pocket expense.
Reimbursement Calculation
With most insurance policies you pay the deductible first and then the remainder of the claim is split based on the copay and reimbursement percentage. Some pet insurance companies have redefined the calculation so that the copay and reimbursement percentage is applied first and then reduce the reimbursement portion by any applicable deductible.
This is a subtle change but may be more dollars than you realize. With this reimbursement calculation the pet owner is reimbursed less and must pick up more of the initial costs of a claim before the insurance policy provides any reimbursement. The magnitude of the impact depends on the reimbursement percentage, size of the deductible and the frequency of the deductible (annual or per incident).
When you are comparing policies, consider the difference in out of pocket expenses so you get an apples-to-apples comparison between options. (This is built into the Company Comparison Worksheet in the toolkit.)
Let’s go through an example to highlight the differences in the calculation. Suppose you have a $200 deductible and reimbursement at 80% and you file a claim for $250.
Deductible then Copay – The pet owner pays the $200 deductible, then the $50 remaining on the claim is split based on the copay/reimbursement percentage. The pet owner pays $10 (20% of the remaining $50) and insurance reimburses $40 (80% of the remaining $50).
Copay then Deductible – The copay/reimbursement percentage is applied to the total claim of $250. The copay portion is $50 (20% of $250). The deductible is then applied against the reimbursement portion ($200) and the remainder is reimbursed. In this case, the reimbursement portion equaled the deductible so there is no reimbursement.
|
Deductible then Copay |
Copay then Deductible |
|
|
|
|
|
|
Deductible |
200 |
200 |
|
Copay |
10 |
50 |
|
Reimbursement |
40 |
0 |
|
|
|
|
|
Total Out of Pocket |
210 |
250 |
|
Total Reimbursed |
40 |
0 |
Table 1, below, outlines the additional amount out of pocket due to the lower reimbursement with the Copay then Deductible method whenever both the deductible and copay is applied to a claim. Table 2 illustrates the minimum claim amount at various deductible and reimbursement levels in order for the pet owner to receive any reimbursement when both the deductible and copay are applied to a claim (Copay then Deductible method).
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Table 1 - Additional Out of Pocket
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Table 2 - Claim with $0 Reimbursement
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In some cases, the amounts are small and not a significant concern. In other cases the costs creep up more than you might realize. Also keep in mind, the extra out of pocket expense (or lower reimbursement) will occur each time the deductible is applicable. On a policy with a per incident deductible the pet owner will incur the extra expense on each incident.
I stumbled across this because due to the age of my dog one company would only offer me a catastrophic style policy ($500 deductible and 70% reimbursement rate) and the company used the Copay then Deductible reimbursement calculation. In the spreadsheets in the Pet Insurance Toolkit, I played around with different sized claims to understand how such a big deductible would impact me. I plugged in claim amounts greater than my $500 deductible and was not seeing the reimbursement I expected. So I really dug into what was causing the difference and ended up backing into the information in the tables above.
I am glad I discovered this while playing around with numbers on a spreadsheet. I don’t know about you, but I would be mighty upset if I did not understand how the calculation worked, submitted a claim for $714.29 and got no reimbursement when I was expecting something closer to $150 based on the traditional calculation.
The reimbursement calculation itself did not knock this company out of the running. I just factored in how it really worked when I analyzed my options. If I had a choice, I would have lowered the deductible and/or increased the reimbursement rate to minimize the impact of the Copay then Deductible calculation, but that was not an option for me and my older dog.
Sara says that when her policy comes up for renewal in March, she is planning to look into upgrading her current policy to a Petshealth policy with a higher per-incident maximum. She will be able to get some hereditary condition coverage and she says now that Petshealth has their wellness care optional, she will be able to save about $50 annually by getting this coverage. Of course, she will need to talk with Petshealth about coverage for conditions that her dog has been previously diagnosed and treated for in a new upgraded policy.