Trends : When Pet Is Sick as a Dog, Is Insurance Best Friend?

It’s a dog’s life.

The question today is, how much is it worth?

To many dog (and cat) owners, their pets are worth the best in medical care, which today includes chemotherapy and open heart surgery. But with the high-tech treatment come high-priced medical bills, and as a result an increasing number of America’s 50 million pet owners are resorting to buying medical insurance for their animals.

Santa Ana-based Veterinary Pet Insurance, formed in 1980 by a group of California veterinarians and licensed by the state, had its best year in 1987, selling nearly 38,000 new policies. The company, which has paid more than $3.5 million in claims, boasts 60,000 policies in 27 states and a renewal rate in excess of 82%.

“We have such a big (customer) base now that we were actually able to lower our rates,” said Dr. Jack L. Stephens, founder of VPI. “Which is kind of refreshing in the insurance field.”

Stephens admits that the company’s profits are small. But he is convinced that as time goes by and veterinary costs rise, more people will buy insurance--a reasonable assumption in view of the latest survey by the American Animal Hospital Assn., which found that Americans spent $4.1 billion on medical care for their pets in 1986.

Although formed in 1980, VPI did not start selling policies until 1982. In that year the company sold more than 8,000 policies, and in 1983 the number was more than doubled.

VPI’s customer base continued to grow steadily over the next two years. But the company saw its largest increases in customers in 1986, with 28,135 policies sold, and finally in 1987 with 37,928 new policies.

Stephens said the average visit to a veterinarian today runs about $140.

Veterinary Pet Insurance offers two policies, both of which are major medical plans. Routine medical care such as vaccinations and neutering are not covered. VPI pays 80% of the first $180 and 100% of the remaining cost, Stephens said.

Premiums start at $44 a year for pets between 2 months and 11 months. The older the animal, the higher the premium.

VPI does not require a complete physical exam. Stephens said VPI is able to control the amount of claims it has and as a result control costs because the company is run by veterinarians, who are able to recognize pre-existing conditions that may pose a high risk.

The company is now developing “top 10” lists of the healthiest and unhealthiest pets because some breeds have been found to pose a higher risk than others, Stephens said. For example, he said, the Shar-pei has a lot of skin problems and dachshunds tend to have a lot of back problems.

The best of care isn’t cheap. “We’ve paid for at least two pacemakers,” Stephens said, adding that the electronic devices designed to regulate the heart beat cost about $1,600 each.

Other examples of costly medical care for animals include $1,145 for treatment of shock and a fracture of a year-old boxer; $855 for a 5-year-old Chihuahua requiring back surgery for a slipped disc; and $244 for a terrier with bladder stones.

But as more people buy pet insurance to offset increasingly high medical bills, critics charge that the insurance itself will drive up the cost of medical care.

J. Robert Hunter, president of the National Insurance Consumer Organization, a consumer interest group, said: “I think it’s a waste of money. And I think it’s dangerous because it will drive up health care costs for everybody.”

Hunter said Americans already spend 15% of their incomes on “necessary insurance.”

“It’s no accident veterinarians are behind it,” he said. “They saw what Blue Cross did for doctors. They want to be able to get on the gravy train. Pretty soon putting a dog to sleep will go up, too.”

According to VPI’s own survey, medical costs for animals climbed 188% from 1981 to 1986. But Stephens said there is no correlation in the rise in medical costs and the availability of insurance.

‘Drugs Are Expensive’

“Treatments were coming along whether we were here or not,” he said, adding, “the drugs are expensive just like they are for humans.”

While there are claims for surgery and hospitalization, Stephens said that for the most part, claims are for common maladies like ear infections, skin rashes, gastric upsets and lacerations.

Stephens said that when he was president of California Veterinary Medical Services he tried to persuade insurance companies to offer coverage for pets. “We couldn’t get them to do it because the premiums were too low and there was too much paper work,” he said.

Others companies offer life insurance, mostly for show animals, but more than 35 attempts to establish a medical program for the nation’s general population of dogs and cats have failed since 1945.

But Stephens persisted, selling his practice in Villa Park to devote all his time to starting VPI.

“We wanted it because there was a demand for it,” he said. “We get a lot of testimonials where the owners have written in or called in and said that if they hadn’t had our help, they would probably have had the pet put to sleep. And they definitely wouldn’t have been able to get the best of care.

Not Much Competition

“To make it a success, it really takes a vet,” he said, adding, “that’s not a challenge.”

For now, there is little competition in medical insurance for pets.

VPI’s largest competitor is Connecticut-based Animal Health Insurance Co., which went nationwide a year ago and now has policyholders in 48 states.

Animal Health spokesman Christopher Cross said the company is now trying to get approval to sell insurance in New Jersey. If approval is granted, Tennessee will be the only state left where the company does not have policyholders, he said.

Cross said that unlike VPI, Animal Health is underwritten by a major insurance carrier, Virginia Surety Co. Inc., in Chicago. VPI is its own carrier.

Cross declined to comment on how many policies the company had sold but said the insurance program was profitable. Still, he said it will take a number of years to fully recoup the initial marketing and start-up costs.

No matter, Cross said, his company is in for the long run. “We’ve test marketed the thing to death, and there is a good market out there,” he said.