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I just finished reading the May issue of Veterinary Economic’s article titled: “Focusing on Pet Insurance: the myths and truths.” I thought I would come up with a few myths and truths of my own. Myth of “aren’t you glad you’re covered:” Dr Robin Downing’s client who can’t afford five thousand dollars for GDV surgery would have been able to, if they only had pet health insurance. Truth: Yes, the one client who had a big unexpected bill will likely receive reimbursement for some of their expenses. But it is very hard to analyze whether insurance would actually be beneficial for most of your clients. Let’s try to examine one.
The insurance that Doctor Downing promotes on her website has a basic plan for a three year old German Shepherd with an annual premium of three hundred five dollars, a one hundred dollar deductible and a two thousand five hundred dollar per incident limit. So for a five thousand dollar GDV surgery your out of pocket expense is two thousand eight hundred and five dollars. Deal or No Deal?
And if one thousand of your clients buy a three hundred five dollar annual policy, they’ll spend three hundred five THOUSAND dollars on pet insurance. Those clients will also spend one hundred thousand dollars for the deductible if they visit once that year. But wait, the basic plan doesn’t cover wellness exams, that’s an add on option. So your one thousand insured clients just gave the insurance company four hundred five THOUSAND dollars, and you and they got NOTHING for it. I know, I know. That ONE client who had the five thousand dollar surgery bill thinks it’s great. They at least recovered half their bill. But the way the insurance industry works, they have to collect more in premiums than they pay out in benefits...a lot more. So should you be RECOMMENDING insurance? The majority of your clients who don’t use the insurance, didn’t need it in the first place. To maximize the use of the coverage your client would have to see you for a single visit where you charge no more than three thousand two hundred twenty five dollars. The client will pay the one hundred dollar deductible and a twenty percent copay of six hundred twenty five dollars. The insurance company will reimburse the client for the balance of two thousand five hundred dollars. Keep in mind that one client has now received more benefits than they paid into the insurance plan. The insurance company has to sign up 9 more clients just to cover that bill. And they still haven’t made any profit.
What if you charge $481.25 for a visit? After the deductible and copay your client is reimbursed three hundred five dollars. They’ve just been “paid back” for the annual premium. Assuming insurance encourages greater usage of veterinary services, and as long as most of your clients spend less than four hundred eighty one dollars and twenty-five cents then the insurance company pays out less than they take in, and theoretically you see more patients. Then recommending insurance is probably is good for YOU. Is it really good for them? Myth of apples and persimmons: Pet insurance is like car insurance. Truth: Well, yes and no. Pet insurance and car insurance are indemnity insurance. But car insurance is required by law, in case you hit someone else. Pet insurance doesn’t cover if your dog bites the neighbor’s kid, which might be a reasonable risk to cover. Car insurance is valuable because most people take out a loan to buy a car. If the car is totaled in an accident and you don’t have insurance, you’d be stuck paying off the loan, for a car than no longer works. And cars cost ten thousand dollars up to eighty thousand or more; a much larger financial burden to replace. In addition, most people are dependent on transportation for survival. If the car doesn’t work, they don’t either. Myth of providing knock your socks off service: The extra paperwork is minimal, and should just be part of providing great service. Heck you can even store the claim forms for each and every insurance provider (if you knew who they were) and print out the ONE form your client needs at the conclusion of each visit! Truth: That was written by an insurance industry hack. Veterinarians already undercharge for their time and expertise. So now, you also should, for no additional compensation help a client fill out a form and comply with any complicated set of rules in order to be reimbursed. We can learn from our friends in the chiropractic profession who bought all those same arguments. They also were initially happy that if chiropractic care were “covered” they were finally legitimized as a medical provider and more patients would seek care because it was covered. And obviously, to provide even greater customer service, we’ll start accepting payment from the clients for only the deductible, then let them pay the balance when they get paid by the insurance company. Soon we’ll be accepting payments directly from the insurance. History shows that within ten years, the small, single doctor chiropractic office had to hire a full-time employee just to process the paperwork: rejections because the form wasn’t filled out correctly ; the denials because the specific diagnostic code wasn’t covered or the patient had already maxed out the coverage for “non-specific dermatitis”; the returns because the insured’s information didn’t match exactly what was on file with the insurance company. We can all see the writing on the wall. Myth of angry clients are a fact of doing business: Sure occasional clients will blame you when things go wrong, but that’s true with any service or company you might recommend, so you can just roll with the punches. Truth: The insurance company has carefully made any payment delays YOUR FAULT. If the vet would only provide a copy of the medical records (which you already have, for the third time) they would be able to pay the reimbursement. If only the vet’s invoice used the proper diagnostic term or code, we’d be able to pay. And the insurance company sets the standard for terms. If your vet had just used a different diagnosis, it would have been covered. Maybe your vet can ALTER THE RECORD and use a different diagnosis so you can get paid. (Clients have actually asked me to do this, on the “implied” advice of the insurance provider and Doctor Downing’s own blog suggests that change the name of a service in your computer is easy to do). And if you decide the insurance companies AREN’T out to serve your clients, you can stop recommending them. BUT the client is still on an annual contract, so you’ll have to live with the negative repercussions of your recommendation for the balance of their contract. And you will hear about it at every visit until the contract expires. Frankly, clients understand that recommending a pet-sitting service or dog-trainer is someone you have reason to recommend and your recommendations may change over time. But recommend an insurance company and you’re perceived to be part of the problems when they occur. Myth of encouraging your staff to work for a third party’s interest: Providing pet insurance as an employment benefit to your employees is a great way to help your staff afford great pet care. And then they’ll talk your clients into buying insurance. Truth: Many years ago a pet food company worked a deal with veterinary universities. They provided pet food at cost to students. Students bought the food because it’s what you could afford on a student’s budget Now upon entering practice, many veterinarians naturally used, recommended and referred that pet food to their clients. The same tactic will build the word-of-mouth for pet insurance. If your employees have the insurance provided as a benefit, they will only pay the deductibles and the copay. Hey, it’s great! But their unbalanced view of the insurance will lead them to proselytize for the insurance company. And employees are more likely to be high users of pet medical care so they are much more likely to use the benefits than an average client. Just as with human health insurance, the worst path for veterinarians is to see pet insurance become an employee benefit that our clients do not pay for out of pocket. When that happens you will see the insurance industry gain more control over what you can charge by referring their policy holders to veterinarians who have agreed to a “fee schedule”. And if they have substantial numbers of clients to refer to you, or away from you they will wield that control. You will eventually have the added costs of additional staff time spent helping clients process forms, respond to insurance company requests for documentation, and the financing or “float” of your fees until the insurance company pays. Insurance is great for the insurance company. But the insurance company only stays in business if they collect more premiums than they pay out in benefits. Could your thousand clients who never use the insurance have put that four hundred five THOUSAND dollars to better use? Now that you have a clear picture of how it works, consider this: clients would be much better off putting aside three hundred or four hundred dollars a year in an interest bearing savings account to pay for future unanticipated “large” pet medical bills. And the beauty is that if they don’t have the large medical bills, the money is still theirs.
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