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Sit, lawmakers! Let Californians handle pet insurance on their own

An Assembly bill to regulate pet insurance is well meaning but wrongheaded
Legislators want to expose the fine print in pet insurance policies, but why aren't consumers reading it?

At least 10 different insurers offer coverage for dogs, cats and other pets in California. That's more choices than Covered California, the state's health insurance exchange, provides to (human) consumers.

Yet virtually every member of the California Assembly and Insurance Commissioner Dave Jones believe the pet insurance market is crying out for more state regulation. They're backing a bill, AB 2056, that would require insurers to disclose more clearly the key provisions of the policies they're selling.

This strikes me as a perfect illustration of the perils of a full-time legislature. When a constituent or sympathetic interest group comes in with a problem, lawmakers are sorely tempted to use the power of government to try to solve it. Yet the more government inserts itself into commerce, the more sand it throws in the gears.

David Lazarus, The Times' consumer columnist, has gone shopping for coverage, and he seems to like at least some of the plans, although he has noted some pitfalls in the past. Nevertheless, I don't doubt the complaints that some consumers have lodged in the media and online about their insurers unexpectedly denying coverage or paying considerably less for medical treatments than they'd seemingly offered. Those complaints helped persuade Assemblyman Matt Dababneh (D-Encino) to introduce AB 2056, which would require pet insurers to make more prominent disclosures of some common restrictions on their policies, such as denying coverage for preexisting conditions.

Among other things, the bill would require insurers to provide new customers a list in 12-point type of features the Legislature considers noteworthy, including deductibles, certain types of exclusions, annual limits and reimbursement formulas. It wouldn't tell insurers what features they could or couldn't offer, but it would force them to let dissatisfied customers cancel their policies and obtain refunds within 30 days of issue (if they hadn't filed any claims).

On first blush, the bill looks like one of the least onerous bits of regulation sought by Sacramento Democrats in some time. The insurance commissioner already has the power to require pet insurers to obtain licenses and submit their premiums for approval. Dababneh's measure would simply require pet insurers to be more forthcoming about the limits of their policies. It's so innocuous, not a single member of either chamber has voted against it (it has been reviewed by two Assembly committees, the full Assembly and two Senate committees so far). Even some pet insurers have endorsed it.

But the state doesn't need new laws to bar companies from misleading customers or failing to honor service contracts. That sort of behavior is already illegal. The problem here, in the legislators' view, is that the contracts for pet insurance are too complex for the average person to understand. They're loaded with fine print that stops people from collecting on their claims.

If that really is the problem, AB 2056 isn't the solution. People who aren't willing to check the crucial details of an insurance policy before they buy it aren't likely to take a sudden interest in them if they're printed on a separate state-mandated form.

And should the complaints about pet insurers continue after AB 2056 becomes law, the next logical step would be for the state to shift from disclosure mandates to coverage mandates, restrictions on out-of-pocket costs and other intrusive rules. That's a pretty good way to drive up premiums and reduce the number of insurance choices for pet owners, as has happened in the health insurance market since Obamacare went into effect.

Pet owners can already find the red flags in pet insurers' products, if only they're willing to spend the time to do so. And if insurers don't offer easy-to-understand policies that provide real value, consumers should respond by insuring their pets themselves, squirreling away money every month for future veterinarian bills.

Consumers can't rely on the state to protect them from bad choices; they have a responsibility to look after their own interests. It's only when they start turning up their noses at constricted policies and denouncing bad deals on social media that market forces will go to work, inducing insurers to be more transparent and offer broader policies. And that's really what pet owners want -- not better disclosure but better coverage.

Follow Healey's intermittent Twitter feed: @jcahealey

Copyright © 2015, Los Angeles Times
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